Rural Development Programme for Lithuania

Transcription

1 Rural Development Programme for Lithuania September 19, 2007 Consolidated version as of 18 th September, 2009

2 CONTENT 1. Title of the Rural Development Programme Member state and the administrative region Geographical area covered by the plan An analysis of the situation in terms of strengths and weaknesses, the strategy chosen to meet them and the ex-ante evaluation An analysis of the situation in terms of strengths and weaknesses The general socio-economic context of the geographical area Performance of the agricultural, food sector and forestry Environment and land management Rural economy and quality of life LEADER Summary SWOT analysis The strategy chosen to meet strengths and weaknesses Horizontal priorities Axis I: Improving the competitiveness of the agricultural and forestry sector Axis II: Improving the environment and the countryside Axis III: The quality of life in rural areas and diversification of the rural economy Axis IV: LEADER Indicative allocation of resources The ex-ante evaluation The purpose of the report Conclusions Recommendations Strategic Environmental Assesment Impact from the previous programming period and other information Justification of the priorities chosen, having regard to the Community strategic guidelines and the additional strategy plan as well as the expected impact according to the ex-ante evaluation Justification of the priorities chosen having regard to the Community strategic guidelines Justification of the priorities chosen having regard to the national strategy plan Expected impacts from the ex-ante evaluation with regards to the priorities chosen Information on the axes and measures proposed for each axis and their description A financial plan Annual contribution from the EAFRD (in EUR) Financial plan by axis (in EUR total period) Correlation table for measures provided for in Regulation (EC) No 1257/1999 and Regulation (EC) No 1698/ Indicative breakdown by rural development measure (in EUR, total period) An additional financing per Axis where applicable The elements needed for the appraisal under competition rules and, when applicable, the list of state aid schemes authorised under Articles 87, 88 and 89 of the Treaty to be used for the implementation of the programme Information on the compatibility with the measures financed by the other CAP instruments, through Cohesion policy as well as by the European Fisheries Fund Designation of the competent authorities and bodies responsible Managing Authority Acreditated Paying Agency Consolidated version as of 18 th September,

3 11.3. Another bodies with delegated functions of Paying agency The certifying body A description of the monitoring and evaluation systems, as well as the composition of the Monitoring Committee A description of the monitoring and evaluation system Administrative checks Ex- post checks On-the-spot checks Control of measures Sanctions The composition of the Monitoring Committee Programme Publicity and Communication Plan The designation of the partners consulted and the results of the consultation The designation of the partner The results of the consultations Equality between men and women and non discrimination Technical assistance operations Annex 1: Measure sheets Annex 2: Demarcation between activities supported under EARDF, ERDF, EFF, ESFM, CF Annex 3: Lithuanian Rural Network members, administration and management Annex 4: Preparation and coordination of the rural development programme of Lithuania for the period Annex 5: Ex ante evaluation report Annex 6: Summary of the SAPARD Mid term evaluation Annex 7: Statutory management requirements; minimum requirements for using of fertilizers; minimum requirements for plant protection products and use of pesticides Annex 8: Good agrarian and environmental conditions Annex 9: Description of the methodology and the agronomic assumptions and parameters in less favourable areas and for organic farming Annex 10: Credit Fund Consolidated version as of 18 th September,

4 1. Title of the Rural Development Programme This Rural Development Programme for Lithuania for the period has been prepared following the provisions of the Council Regulation EC No 1698/2005 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) and further the Commission Regulation No No 1974/2006 laying down detailed rules for the application of this Council Regulation. Furthermore, this document is in full compliance with the provisions provided by the Council Regulation No No 2006/144/EB laying down the Community strategic guidelines for rural development which have been translated into the National Strategy Plan for Lithuanian for the specified period.. 2. Member state and the administrative region 2.1 Geographical area covered by the plan This Rural Development Programme is prepared for the Republic of Lithuania and covers the entire territory of the country. The entire territory of Lithuania is classified as eligible under Convergence Objective. The Rural Development Programme has been prepared following the National Strategy Plan for the period and is aiming at the implementation of the strategy. The National Strategy Plan will be implemented through a set of measures grouped together in accordance with the Axes defined in the Title IV of the Regulation (EC) No. 1698/ An analysis of the situation in terms of strengths and weaknesses, the strategy chosen to meet them and the ex-ante evaluation 3.1. An analysis of the situation in terms of strengths and weaknesses The general socio-economic context of the geographical area Lithuania is located in the eastern part of Europe, bordering Latvia in the north (610 km long border), Belarus to the east and south (724 km) and Poland to the south (110 km), as well as Kaliningrad region of Russia (303 km) to the southwest. The total surface area of Lithuania is 65.3 thousand sq. km (roughly the size of Ireland). Lithuanian population is 3,414 million of which 33,4 pct live in rural areas. After gaining independence in 1991 Lithuania has experience dramatic political, social and economic changes, the key ones in the first years being the economic recession, hyperinflation and high unemployment. Later on, the recovering Lithuanian economy was influenced by the Russian economic crisis. Only in 2002 the economy started to recover domestic consumption started to increase, unemployment decreased. Since 2003 Lithuania is among the countries having the most rapid GDP increase (in the period the average annual change in GDP was 7 pct. ) and unemployment decrease (from 17,4 pct in 2001 to 11,4 pct in 2004, 7,6 pct in 2005). Lithuanian GDP per capita (at purchasing power parity) in 2006 constituted only 54,8% of the EU average, which shows a large disparity between the level of development of Lithuanian economy and the EU economy as a whole. Lithuania s EU membership has created favourable conditions for a stable development of Lithuania s agriculture and rural life. The free movement of goods has opened up the possibility to operate in a bigger and more opened market and the Lithuanian agricultural producers have become entitled to a range of possibilities e.g. EU export support instruments, favourable conditions for the trade with third countries, direct payments the effect of which is reflected in the increased incomes Consolidated version as of 18 th September,

5 of farming community, etc. Free movement of labour allows people to be employed in other EU countries and provides possibilities for young generation to study abroad and to become familiar with the newest and most advanced technologies including obtaining management and other advanced business development skills. Free movement of capital has among others created favourable conditions for investments in Lithuanian rural life, agriculture and food industry and enhanced conditions for business operations to provide themselves with financial resources. On the other hand Lithuanian agriculture has been exposed to the challenges of the EU common market in the form of higher competition for agricultural and food products in the domestic market, the need to comply with high quality standards as well as defined trade and production quotas. In May 2004, EU market regulations started to apply. The milk quota and the potato starch quota were introduced. The intervention system was adapted to EU legislation and the EU market regulation system with export subsidies started to apply to Lithuanian exports. Regarding commodity payments, the bio diesel production support program started, and payments were granted for dried fodder and fiber flax. The simplified direct support scheme was introduced in Lithuania in 2004 and it will be applied till the end of That scheme introduced a regional decoupled payment called as single area payment into Lithuania s agriculture as well as coupled complementary national direct payments. It is foreseen to shift from the simplified direct payments scheme to the single payment scheme from Year by year direct support is increasing due to the phasing-in (according the Article 143a of Council Regulation (EC) No 1782/2003) applied to new member states countries. The gradual application of compliance conditions for direct payments has started with the progressive introduction of CAP reform in In 2004 five measures have been established for the maintenance of land in good agricultural and environmental condition. Conditions for identification of cattle and ewes were introduced in Other compliance conditions such as conditions for maintaining plant and animal health, animal welfare conditions and farm advisory system will have been introduced by the start of the 2003 CAP reform implementation. The export subsidies and the free accession to the European Union s domestic market encouraged the export of agricultural and food products. The export of agricultural and food products are growing, export balance, former known as negative one, become positive and it is still growing. However, changed direct support scheme (objects of support and level of support) have initiated some important structural changes in farm production structure as well as sectors structure. The overall area under direct support is increasing; the number of animals is increasing too. However, some sectors (for example fiber flax growing, calves growing) is deteriorating due to comparatively low direct support and more encouraging purchase prices in other European Union countries. The average size of the holding is increasing. The energy crop growing is becoming more popular. The sugar sector reform has also motivated more farmers to get involved into energy crops scheme. The organic farming, supported under the simplified direct payments scheme and Rural Development Plan, is getting the important part of the agriculture. Due to the 1 st pillar measures the income of farmers are exceeding the income of other habitants of rural areas and even are hunting the income of urban habitants. These tendencies encouraged habitants of rural areas to enlarge their holding at least for maintaining land under good agricultural and environmental conditions. These actions are in straight line with European Unions environmental preoccupations and measures aimed to maintain and preserve natural resources and landscape in rural areas. According to the poll carried out in February 2005 by "Eurobarometras" Lithuanians are among those who have the most positive opinion of the EU CAP 48 per cent think that due to it living Consolidated version as of 18 th September,

6 conditions of rural residents are being improved, 47 per cent believe that it ensures income for farmers. More than a half 51 per cent of Lithuanians think that the EU CAP helps the farmers to make their products meet the customers needs (43 per cent of all EU people think like this), 60 per cent of Lithuanian people believe that this policy actively supports development of organic farming (47 per cent of EU residents agree with this). A number of Lithuanians thinking that with the help of the EU CAP living conditions of rural residents are being improved is by 8 per cent higher than the EU average of 40 per cent. Optimism related to stable income in Lithuania differs even to a greater extent only 37 per cent Europeans think that the EU CAP helps to ensure stable and sufficient income for farmers, and 47 per cent of Lithuanians think this way. Lithuania is the tenth among 25 EU countries whose people think that the EU CAP is fulfilling its task: 56 per cent of Lithuanians think like this about the l EU CAP. With regards to the EU CAP, Lithuania is the most optimistic among all the Baltic States. Agriculture in Lithuania is one of the priority sectors playing an important economic, social and environmental role. In 2006, 5,0 pct of the entire Gross Value Added was created by the agricultural sector, GDP in agricultural sector rose by 5,7 pct compared to In 2006 GDP in agricultural sector rose 29 pct campare with Trade of agricultural and food products constitute a significant share of the Lithuania foreign trade. Export of agricultural and food products in 2004 accounted for 10,9 pct. out of the total export value, while imports accounted for 8,6 pct. Export of agricultural and food products in 2006 if to compare to 2005 did increase with 29 pct, whereas it did increase with 37 pct in 2005 compared to This was conditioned by the abolishing of trade barriers as well export subsidies paid for the export to third world countries. The main export market for agricultural products is EU, which did account for 75 pct in Compared with 2003 this is an increase of 50 pct. The import from the EU was about 20 pct. Similar to previous years, the export in 2006 of prepared foodstuffs and products of animal origin made up the major share of the total agricultural and food production export with 41,2 pct.. Moreover, dairy products, mainly cheese, did in 2006 made up the largest share - 18pct. of the total agricultural and food export, while animal fodder did account for approximately 12 pct., grain 9 pct., fish and fish products 11 pct. and meat 3 pct. of the total agricultural and food export. One third of Lithuania s population lives in rural areas and 15,8 percent of residents were employed in the sector of agriculture, hunting, forestry and fishery, meanwhile in the EU-25 this indicator amounted to 5 percent. In the rural areas, great dependence on primary economic activity of agricultural production prevails: in 2006, there were 87,3 percent of all country s agricultural, hunting, forestry, and fishery sector employees, which amounts to approximately 48 percent of all employed residents of rural areas. According OECD, the entire territory of Lithuania is treated as rural, however, for the implementation of this Rural Development Programme, the definition of rural areas according the Lithuanian legislation will be used. Rural areas in Lithuania are considered all territories, which do not fall under the category of urban territories, or territories of urban-type settlements 1. The rural areas make up 97,4 pct of the total area of Lithuania and the rural population counts for 33,4 pct of the total population. 1 When determining rural and urban territories, the Law on Territorial-Administrative Units ( , No. I-558) is applied, namely the Article defining the concept of living localities in the territory of the Republic of Lithuania. Consolidated version as of 18 th September,

7 Furthermore, most of the High Nature Value Areas are situated within rural areas and preservation of them to a great extent depends on the level and methods of human activities within these areas. Table 1: Context related baseline indicators Horizontal Designation of rural areas Importance of rural areas Indicator Measurement Value(2005 year) % territory in rural areas % population in rural areas % Gross Value Added in rural areas % employed in agriculture 97,4 33,04 5,1(EU25 2) 14 (EU 25 4,9) Agricultural land use (Ha, %) UAA/ arable area / permanet grass/ permanent crops (100%) / (67%) / (32%) /(1%) AXIS 1 Competitive ness Farm structure Forestry structure Forest productivity Number of farms total (thou) In Utilized Agricultural Area (thou) of which (thou) <5 ha 5-20 ha ha 50=>ha Average area farm size (hectares) Average economic farm size Labour Force (% employed persons aged 15-64, unemployment rate) Area of forest available for wood supply (FAWS) (thou ha) Ownership (% area of FAWS under "eligible" ownership) Average size of private holding (ha)(fowl) Average net annual volume increment (FAWS) (thou m³ over bark) 252, , ,93 102,15 14,97 5,9 11,1 (EU 25 16,5 ha) 8 ESU 59,3 (EU 25-63,8) 7,6 (EU25 8,7) , AXIS 2 Environment Total land (thou ha) Land cover area in agricultural (thou ha, % ) forest (thou ha, % ) Less Favoured Areas % UAA in LFA Out of which LFA with specific handicaps Natura 2000 area % territory under Natura 2000 % UAA under Natura 2000 % forest area under Natura 2000 Biodiversity: Protected forest % FOWL protected to conserve biodiversity, landscapes and specific natural elements (MCPFE 4.9, classes 1.1, 1.2, 1.3 & 2) Development of forest area Average annual increase of forest and other wooded land areas (thou ha) Forest ecosystem health % trees / conifers / broadleaved in defoliation classes 2-4 Water quality % territory designated as Nitrate Vulnerable Zone (47,7 %) 2 120,9 (32,5) 43,5 0, (12 %) (18,7%) (25 %) 13, ,1/ 9,3/ 15,4 100 Consolidated version as of 18 th September,

8 AXIS 3, Wider rural development Population density Population density (population per sq. km.) Age structure % people aged (0-14) y.o. / (15-59) y.o. / >=60 y.o. in total population Structure of the Economy % GVA by branch (Primary / Secondary / Tertiary sector) Structure of Employment % employment by branch (Primary / Secondary / Tertiary sector) 52,3 18,1/ 58,6 /23,3 5,3 / 35,3 /59,4 42,6 /21,5 /35,9 Long-term unemployment % long-term unemployment (as a share 4,3 (EU 25-3,9) of active population) Educational attainment % adults (aged 15 years and over) with Medium & High educational attainment Higher 6 %, medium- 22% Internet infrastructure DSL coverage 31,7 pct Performance of the agricultural, food sector and forestry Farm structure and competitiveness Efficiency as well as competitiveness within the primary agricultural production does to a very big extent depend on the farm size and further the farming structure itself. Around 61 pct of the available land in Lithuania is used for agricultural activities. The land reform has been ongoing since 1991 and by January 2005 property rights was restored to 4,1 million ha or 92 pct. of the area claimed by the requests. Utilised agricultural area in Lithuania in 2005 made almost 40 pct from the total land area. Out of this area, arable land constituted 48 pct whereas grassland and pastures almost 45 pct. Other UAA (12 pct) was declared as orchards, set-aside as well used for other purpose. This in fact shows a good balance in the land use, which is of particular importance from environmental point of view as it benefits the biodiversity, minimises the soil erosion, also contributes to water quality, mitigates climate change. Table 2: Use of agricultural land in farms (thous. hectares) UAA Arable land total sown area fallows 2792,0 1871,9 1720,8 151,1 Meadows and pastures Fruit and berry plantations Nurseries Other permanent crops Greenhouses 890,7 27,3 0,5 0,7 0,9 22,0 Unutilised agricultural land The ongoing land reform has been changing the structure of agricultural land from the point of view of its users. During the reform process the big sized collective farms have been replaced by farmer s farms, family farms, agricultural companies as well as very small scale (2-3ha) holders of agricultural land. The number of farmers farms is increasing, while the number of family farms as well as agricultural partnerships and other kinds of agricultural enterprises and the area of land at their disposal is diminishing. Consolidated version as of 18 th September,

9 ,8 15,1 10,9 11,5 12,4 9,3 2,3 2,5 2,7 Average farm size, ha UAA Average milk farm size Average meat production farm size 3,0 4,3 4,6 4,7 5,3 36,8 2003* ES-25 Fig.1 Average size of farm in Lithuania and EU 2005 Source: The analysis of agricultural farm structure Even though in the last few years the average farm size has increased ( ,4 ha, ,1 ha, ,4 ha) the sector is still predominant by small semi-subsistence farms, which makes up 2/3 of the farms having a size up to 5 ha 2. In fact, the small semi subsistence farms produce about 45 pct. of agricultural produce. However, their incomes due to small production volumes, low quality produce are insufficient for upgrading the farming methods, accumulating sufficient amount of capital top be used for the modernisation of farms. The creation of market-oriented farms is still slow and makes a small part in the entire farm structure. This is a result of long land reform process, still passive functioning of land market and lack of investment capital as well as insufficient human capital. As the result of the land restitution process, the farming areas became very fragmentised and unfavourable for farming - most of the farms consist of small separate land plots, which are in distance from each other. Such a situation is not favourable for the economic operation in the farms, and results into ineffective use of inputs and machinery. There is a strong need for fostering the land consolidation processes, which at the moment are in a very early stage of implementation. Further management of land in Lithuania will be strongly connected with land consolidation which is expected to contribute to the improvement of the farming structure and further competitiveness of the farms as well as to the implementation of the rural development policy and priorities as such. Thus, land consolidation in Lithuania is not seen as a process alone but, in fact, in the overall rural development context, where also other available rural development measures will complement the land consolidation in order to ensure the sustainable rural development. Furthermore, the existing agricultural infrastructure, such as farm roads, drainage systems are not in favour for the development of agriculture, most of the drainage systems are designed for the large scale farming (left from the Soviet time); many of them are outdated. Establishment of co-operatives is considered as one solution for small-scale producers to strengthen their positions. In 2004 there were 200 cooperatives, which united about members. However, most of them were small-scale cooperatives. Also, most of them are engaged in production and not as much in ensuring proper supply of the produce to the market, i.e. there is a 2 Avergae farm size in the EU 25 16,5 ha, EU 15 21, EU Consolidated version as of 18 th September,

10 need for the development of vertical cooperatives. Establishment of cooperatives is still not popular mainly because of Soviet cooperative experiences. The same applies to the establishment of producer groups. Thus, there is a need to promote such processes and to encourage the producers to establish producer groups as well as cooperatives, in order through joined efforts to make the production more effective, to modernize the production and to improve the quality of the produce, to ensure bigger volume production for sale in order to get better prices and further higher income. In such a way the value added will be increased and this will result into the increased competitiveness. The competitiveness of the agricultural sector, amongst other things, is depending on human potential. Approximately 60 pct. of the Lithuanian farmers are 55 years or older, while 14 pct. are 40 years or younger, 26 pct of farmers are between years. In the period , of young farmer s farms have been established. Data from the farm Accountancy Data Network (2004) shows that farms run by farmers up to 40 years generated an income being 14 pct higher per 1 ha than in the farms run by farmers of 55 years or older. However, older farmers are unwilling to withdraw from agriculture, as this activity is the main income source for them. As a consequence, the structural changes are slowed down. Older farmers lack farm management knowledge and skills, have limited abilities in implementing new technologies and, in general, in corresponding to the changing market demands. It can be concluded that fragmented farms structure characterised by small average farm size as well as scattered land plots within one farm, lack of cooperation and the ageing trend of farmers are perceived as the key factors hindering the competitive development of agricultural sector. Education and training of farmers, advisory system Agricultural education can be obtained at 2 universities, 8 vocational and 27 agricultural and other professional education establishments. Currently 36 pct. of farmers hold primary, 29 pct. secondary, 31 pct. upper secondary with vocational qualification and only 6 per cent higher education. Thus, lack of qualification at farm level causes inadequate farm management, hampers implementation of innovations and creation of competitive farming sector. New graduates with agricultural education tend to search for employment in other sectors then agriculture, thus the older and less educated farmers dominate. Taking into account the demographic structure amongst farmers, the need for vocational education is increasing in order to raise the qualification of those engaged in agriculture and to ensure that farmers on the continuous basis are provided with the possibility to renew his/her knowledge as well to obtain new knowledge which is a prerequisite in order to adapt to ever changing economic and social environment. As regards consultancy network for farmers in Lithuania, there is established a unified consultancy network, consisting in total of 36 consultancy institutions accredited by the Ministry of Agriculture which are providing consultancy services to agricultural entities as well as others from rural areas. The main institutions providing the consultancy services are Lithuanian Chamber of Agriculture and Lithuanian Agricultural Advisory Service. Chamber of Agriculture is playing an important role in provision of consultancy services targeted at broader rural development issues. Moreover, the Lithuanian Agricultural Advisory Service plays an important role in the training of rural inhabitants. There are 48 offices in total, each employing 2-9 specialists providing qualified services and consultations in traditional plant-growing, cattle breeding, accounting of the farm economics, construction and mechanization of agricultural buildings, etc. In general, Lithuanian farmers have a good access to the consultations of general nature in the area of traditional production methods, farm economy and accountancy. However, there is a lack of Consolidated version as of 18 th September,

11 specialised consultations and training in the field of ecological farming and implementation of environmental and other requirements, community development and partnership (in particular as regards implementation of LEADER type actions), in the field of marketing and diversification of economic activities. Therefore, it is important in the future to ensure the provision of such type consultations to farmers and rural dwellers. As regards the forestry sector, it should be emphasised that insufficient forest management knowledge of forest owners is not less an important problem. Training of forest owners is mainly organised through the Forest Owners Association of Lithuania, which represents the interest of forest owners. It is the founder of the public institution Private Forest Extension Centre, which is organizing courses for forest owners throughout the country since Furthermore, the private forest owners cooperatives are also organizing training courses to private forest owners. This said, most of forest owners still lack knowledge and experience in sustainable forest management techniques and therefore these services require to be strengthened. Innovations Globalisation and the increasing international competition have accelerated the need for knowledge generation and innovation in companies in general in order to survive in the market. This need emphasizes the importance of cooperation between knowledge and research institutions and companies as it has been stressed explicitly in the Lisbon strategy. Overcoming the barriers for effective cooperation between knowledge institutions and companies as well as establishing the framework for optimal cooperation and the internal innovation capacity of firms is an important challenge for the Lithuanian economy in the years to come. Consequently, in order for the Lithuanian agriculture, food and processing industry continuously to increase competitiveness there is a permanent need to invest in the development of new products, processes and technologies, implement innovative approaches in order to create higher value added and as a result higher quality products. New developments within information and communication technologies as well as within biotechnology and genetics put pressure on existing and so-called traditional technologies. Also marketing channels and the whole marketing structure needs to be improved. Statistical data on innovation and innovative behaviour of the Lithuanian food processing industry is not available. On the other hand the institutional set-up for increasing awareness of innovations and for the need of innovations has been developed over the latest years through various government initiatives. Focus has been on capacity building on innovation, innovation management and networking between knowledge institutions and companies in Lithuania. Aiming at increasing the value added created by Lithuanian food sector and also in ensuring that proper conditions for the representatives of science and business are created for participation in various EU technological platforms, in 2006 there was established National Food Cluster. The aim is to ensure that benefits from vertical integration in the food chain from the field to the table where cooperation between all key players, including science and technology, result into the higher value added of food sector and further competitiveness. The strengthening of the innovation structure and capacity in Lithuania is highly relevant for companies and the research and knowledge organisations. Networks need continuously to be enhanced and staff in research and knowledge institutions as well as in the industry must be trained to develop the innovation capacity further in Lithuania in the future. This will be an important priority for the National Strategy to ensure that resources are available for supporting the development of innovation and knowledge transfer and dissemination. Consolidated version as of 18 th September,

12 Primary agricultural production Favourable natural conditions, stocks of feedstuffs, traditions and experience in animal breeding, dairy and meat production allow Lithuania to lay the foundations for the development of stockbreeding. Today, animal breeding sector is also the underlying branch of national agriculture dominant by milk and meat production and makes 49 pct (2004) in the total agricultural production produced in all farms, whereas the crop production is regarded as a supplementary production. In 2004, the dairy production constituted almost one fourth of the total value of agricultural production, the same ratio applies in the export - diary products constitute also one fourth in the total exports of agricultural and food products. In Lithuania both milk and meat sectors are dominant by small-scale producers and this results into a low labour productivity, competitiveness of the primary livestock production, difficulties in complying with quality, hygiene, environment and animal welfare requirements. The average milk farm in 2005 was 2,6 cow per farm, however, some slight increase in the milk farm size is observed (the number of farms having up to 2 cows has decreased by 28 pct in the last 5 year period). Some of the small milk producers have withdrawn from the milk production as the result of the introduced early retirement schemes favouring withdrawal from the milk production. The average meat production farm in 2005 had 4,5 livestock, more then half of the farms have only 1-2 livestock whereas farms with 50 or more livestock constitute only 0,5 pct. of the total number of farms (2004). Small farm size conditions limited accumulation of capital for further investments and modernisation and further low productivity and competitiveness. Some positive developments are observed in the development of milk productivity. The average milk yield per cow has increased by almost 14 pct in 2004 (4 176 kg) in the last 5-year period as the result of increasing number of modern milk farms the productivity of which is high and therefore contributes to the average milk productivity per farm. However, it is still more than 30 pct. lower than in EU-15. Thus, the productivity can only increase as the result of the modernisation of the farms. Low productivity both in meat and milk production farms is also a result of insufficient stocks of genetic potential (in meat sector the stock is dominant by milking cows), low quality of feedstuffs produced on the small-scale farms and, furthermore, poor farm management practices, in general. Strengthening of primary meat production is very important due to the fact that meat processing industry which is undergoing modernisation in the last years (especially as concerns the big scale processing units) in fact lacks raw meat material in order to use the full available capacities. Implementation of the EU Nitrate directive in the primary production is of vital importance since still many farms fail to meet the requirements set in the National Action Plan implementing the directive. Thus, substantial investments are needed to ensure proper manure and slurry handling as well as other requirements. Aiming to increase competitiveness of primary livestock production there is a need to improve the farm structure as this is of vital importance aiming to increase the productivity which, in fact, can only be a result of a number of actions such as improved breeds and feedstuffs, etc. Moreover, the investments into physical structures of livestock farms (milking and cooling equipment, manure and slurry management, etc) as well as improvement of farm management practices through investments into human capital will result into increased competitiveness. Consolidated version as of 18 th September,

13 Lithuanian climate conditions and natural soil productivity is favourable for the development of crop production. The main crops grown are wheat, rye, rape, flax, sugar beet, potatoes, fruits, vegetables, etc. Arable land from the total declared land used for agricultural purpose (UAA) made 48 pct in 2005 and was used for growing crops. Generally, in the development of crop production the following key production tendencies are identified: crops grown for feedstuffs and food (both for internal and foreign market) and crops grown for other purposes, the key one being the bio-fuel production, for example. The production of main crops in Lithuania (grain crops, flax, potatoes, vegetables etc) is still characterised by insufficient yields as well as quality. This is a result of usage of outdated technologies, lack of proper machinery, various drying and storage facilities as well as packaging equipment (especially as regards vegetable and fruit and berry growers), use of poor quality seeds (currently only about pct. of the total grain crop area was sowed with certified seeds) as well as lacking farm management practices. Furthermore, problems mentioned above, such as unfavourable farm structure, low level of producer s co-operation are also factors hindering the development of competitive crop production. Generally, all crops grown in Lithuania are given an equal priority. However, the development of production of certain crops, as for example, rape is envisaged to increase. Although rape is a relatively new crop in Lithuania, it is expected to have a great potential in the future in the light of the increasing demand for bio-fuel. In 2005 about 8 thou. tons of ethanol was produced from grain and the same amount from rape, i.e. using 12 pct from the entire rape harvest. In line with EU policies for the Bio-ethanol sector, it is expected that in the period the demand for rape for the bio-fuel production will increase by 6 times and in 2007 almost all rape harvest will be used for the bio-fuel production. Generally, in the light of the CAP reform, the structure of the crops production is expected to change where more competitive crops (such as rape, grain for technical purpose) will take over the crops that are becoming not as competitive (for example, sugar beets). The number of organic farms has been steadily increasing - from 9 organic farms in 1993 cultivating 148 ha to 1811 farms in 2005 all together occupying almost 69,5 thousand ha. The area of certified organic farms is 2,7 pct of the total agricultural land in Lithuania declared as used for agriculture. In 2005 an average certified organic farm covered 38 ha. 55 per cent of them are plant growing farms, 41,3 per cent mixed farms (plant growing, cattle breeding, bee keeping etc.), 2,5 per cent bee keeping farms and 1,2 per cent fishery farms. Table 3: Development of bio-organic farming in Source: Ekoagros, Year Number of farms Area, ha In terms of the area of certified land (2004) Vilnius County (13713 ha) ranks first, then come Utena (6139 ha) and Panevėžys (6167 ha) County, next Alytus (3770 ha) and Kaunas (3752 ha), Telšiai (2775 ha), Tauragė (2389 ha), Klaipėda (1721 ha), Šiauliai (1477 ha) and the last one Marijampolė (1052 ha). The major part of certified lands is cereals almost 48 per cent and meadows - 41 per cent, 11 per cent of the area is used for set-aside, vegetables, potatoes, berry plantations, orchards etc. As a rule, organic and conventional farms are mixed, i.e. they produce different products: grain, potatoes, livestock products, fodder, etc. 48 per cent of organic farms specialize in mixed cropping, 30 per cent general cropping, mainly cereals, 16 per cent crops mainly vegetables, etc. Consolidated version as of 18 th September,

14 As for livestock production, the major organic product is milk. In 2004, the main certified domestic livestock was cows (56 per cent), after that bulls (26,3 per sent). Cows as well as beef and poultry are sold as ordinary products, without the mark of organic certification. Despite of recent growth, organic production remains relatively small scale and fragmented and this is hampering effective marketing. All organic food is going to the domestic market. There is no export of organic products to other countries. Assortment of organic crop production is very similar to conventional and it is very traditional. Analyses of certified organic crop production show, that grains are very much the dominant organic market sector, taking some 60 pct. of the total value. The most grown grain is rye and wheat. Organic products are in increasing demand in Lithuania. Where as before only very few specialised shops were operating in which organic products were sold, but in 2003 the biggest supermarkets started placing the organic products on separate shelves and promoted these products. However, until now still a lot of organic products (also like most of the conventional products) are sold through direct marketing channels. There is an obvious need to improve the farm structure, to ensure the increase in productivity as well as quality, which can only be achieved through investments into physical and human capital. Currently, Lithuanian agriculture is labour intensive, however the future belongs to investments which would gradually switch the labour intensive primary agriculture to intensive use of machinery, new technologies and this will certainly have adverse effects within rural life, i.e. people not able to turn their farms into economically viable units will gradually be forced to abandon their usual so far agricultural activities and to look for the alternative economy. Therefore, the efforts in ensuring the balance between the competitiveness and rural development as such, is given a high priority in formulating the overall strategy for further development of agriculture and rural life. Processing industry The competitiveness of agricultural sector as such is dependant both on the primary production as well as on the processing industry. Therefore, the balance between the primary production and processing industry in terms of quality and quantity of raw materials as well as capacities available is very important. The food processing industry is one of the largest industry branches in Lithuania. The supreme branches of the food industry are dairy and meat processing. More then 70 pct. of food production is consumed in domestic market. The main products for export are milk and milk products in 2004 it made about 29 pct. of the total export from agricultural production. The main markets for the export are the EU countries and Russia. Food processing industry in the last 5 years has undergone dramatic modernisation due to the available financial support from the EU SAPARD programme and further Structural funds. In 2004 there were 397 enterprises engaged in meat, fish and milk processing and production, more then half of them have been granted permission to export their production to EU. Most of these enterprises are big scale processors, however smaller scale processing enterprises still lack modernisation level in order to produce high value added competitive products. In the last few years the sale of dairy produce has increased by 23 pct and the export with 56 pct. The net profitability of dairy enterprises in 2004 was almost 5 pct and since 2001 increased by 11 pct. The growing demands for ecological dairy products reveal new possibilities for dairies. The sale of meat products in the period increased significantly, i.e. by almost 79 pct, export Consolidated version as of 18 th September,

15 increased more then 3 times. Income from the exports made up to 10 pct, i.e. increased by more then 60 pct. However, despite the rapid modernisation within milk and meat processing, the impact of which, as said above, is in fact reflected into increased production volumes as well as exports, there is still a lot to be done in order to strengthen the gained positions and further to increase the competitiveness of the sector. In order for the Lithuanian milk and meat industry to be become more competitive there is a need to invest into the development of new products, processes and technologies, implement innovative approaches in order to create higher value added and as a result higher quality products. Also marketing channels and the whole marketing structure needs to be improved. Grain processing companies, like milk and meat processing enterprises, have in recent years undergone modernisation. Technological lines for cereals preparation and other equipment have been renewed. However, majority of enterprises have high energy consuming technologies designed for large-scale production. As a result, production costs have grown and output quality has fallen, which influence competitiveness. However, some companies that have gradually modernised the process of production have managed to significantly increase their market share. In the last few years, about 15 pct of fruit and vegetable processing enterprises have received support for modernisation and upgraded the processing facilities, however, they process only about 5-7 pct of the produce produced in the country and the rest is being imported. This is one example of the obvious need to strengthen the primary production in order to utilise the available potential for the fruits and vegetable growers, which not only have to increase the quality of produce but also to co-operate in order to supply the processing industry with the required amounts of produce. Moreover, the remaining part of the fruit and vegetable processors, still lack investments in order to meet the quality, environmental and hygiene requirements since most of them still use outdated technologies. The main reasons for the low competitiveness of the vegetable producers are unproductive technologies, outdated storage capacities, undeveloped vegetable preparation, packaging and marketing systems. The same problems mentioned also apply to the processing of the fruits and berries. The increasing demand for organic production and the developing primary production of organic products create favourable conditions also for the development of processing of such produce. Currently, there are about 130 different processed products in production, including bread, mill corn, grain mixture for children, pasta, juice, herbs tea, goat milk and etc. The production line from the field to the table for some products, for example bread, has already been formed: there are certified mills, bread bakeries and other processing companies. The range of organic products is increasing. However, there is a strong need to invest into the processing of organic products, support the establishment of modern processing technologies. Thus, currently there is a situation when the volume of the organic production produced on farmer s farms is in fact increasing but the supply of the final organic products is in fact insufficient. Furthermore, there is a strong need to strengthen the marketing of organic production. Lithuania still remains a country with relatively low labour costs. Considering that the food industry is labour intensive, this advantage becomes noteworthy. Labour costs remain much lower than in old Member States. In average they constitute pct. of EU 15 salaries in food industry. Eastern European wages exceed Baltic ones in average on 20 pct while productivity levels are quite similar. However, it is projected that in Lithuania by the year 2010 the average salary will reach the EU 25 level, therefore the labour costs are also expected to increase. Thus, it can be concluded that Lithuanian processing industry is undergoing rapid development since the production and sale volumes, especially export to the EU, are increasing, processing Consolidated version as of 18 th September,

16 enterprises are undergoing modernisation, the quality of products as well as the variety of products increases. However, on the other hand, the labour productivity and business profitability is still low, the operations lack innovative actions, marketing tools are still poorly used and are underdeveloped. Labour productivity in primary and processing sectors The primary agricultural production as well as processing industry, beside the key shortcomings identified above, are characterised by quite low labour productivity. Within primary production in 2005 it was 4,086 thou EUR/AWU and it has though increased in the last four years slightly by 33 pct. Labour productivity in the processing sector in 2005 was 9,74 thou EUR/AWU and is therefore also considered too low. Forestry Forests represent one of the major Lithuanian natural resources serving for the welfare of the state and its inhabitants, preserving the stability of the landscape and environment quality. The total forestland area accounts for 30,2 pct. (2005) of the total country s area. The total timber volume accumulated in the forests of the country reaches 388 mill. m³. Average forest area per capita is 0,6 ha. The area of mature stands as well as the area of growing stock volume is increasing. These indicators grow due to enlarging area of forests and decrease of the population. As regards forest age, middle-aged forest dominate (42,5 pct) followed by young stands (24,5 pct), mature (19 pct) and premature stands (14 pct). Coniferous stands make 58,9 pct., followed by soft- broadleaves, which make 36,3 pct. and hard-broadleaves comprising 4,8 pct. Forestry and forest industry plays an important role in the Lithuanian economy. The gross value added in the forest sector and forest industry in 2005 was 4,1 pct., forestry sector makes about 0,7 pct of the country s GDP. The greatest part of gross value added comes from wood and wooden articles production and from furniture industry. The main imports of round wood come from Byelorussia, Russia and Ukraine and the biggest share is the round wood of conifers. The main export markets of round wood are the Scandinavian countries. Forest sector employs about 5,2 pct from the total employment and this share has been slightly increasing (by almost 1 pct in the period ). Annual felling volume in the last 5 years has been increasing and in 2004 has stabilised. It shall be noted that 15 year ago annual felling amount in forests was about 3 mill m³. Due to increasing areas of premature and mature forest stands and their volumes in the forests, forest cutting volumes have been increasing, especially in private forests. In the last few years, about 6 mill m³ of timber was cut in the Lithuanian forests annually, whereas the total annual timber increment is about 12 mill. m³. Therefore, the increasing felling volumes are in line with the sustainable use of forest resources. As regards health status within forests, the biggest problem persists in south-eastern part of Lithuania, where pure conifer stands have been established on huge areas of agricultural land some year ago. These conifer stands are being affected by Root Rot fungi disease (Heterobasidion annosum), which affects the roots of conifer stands and results into drying out of the big areas of conifer stands. Therefore, the current policy for afforestation is to promote establishment of mixed stands with broad leave species dominating, as this particular disease is not common in the mixed stands. There are no any serious damages done to the forests by wildlife, except in case of afforestation. Very often the newly established forests are damaged by wildlife, therefore there is a need to ensure the proper protection means are applied (individual protection means, repellents, etc). Consolidated version as of 18 th September,

17 The labour productivity in forestry sector is also like within agriculture and food industry quite low. In 2005 it was 9,74 thou EUR/AWU. Substantial forest areas are designated for forest ecosystems, soil and water protection, recreation and for other ecological and social functions. The forests of strict reserves, special-purpose and protective forests make more then 29 pct. of the total forestland area of the country. Lithuanian forests are rich in mushrooms, berries as well as fauna. Non-wood products account for about pct. of income from all forest products. Main non-wood forest products are mushrooms, berries and fruits, medicinal plants, game meet, Christmas trees, etc. Up to 30 species of medicinal herbs are harvested in Lithuanian forests. Juniper berries, bearberry leaves and black alder bark are the most popular and of the greatest demand. In some regions like South and South East Lithuania the value of collected mushrooms and berries is close to and even higher than that of wood. There are about 4,5 million ha of land used for hunting in Lithuania. Fields, shrub land and water areas account for major share in total area used for hunting. Currently 32,8 pct of total forestland area is private forests, 49,3 pct state forests and 17,9 pct are state forests reserved for restitution. Total number of private forest holdings in Lithuania is about 150 thousand, average area of private forest holding 4,6 ha and forest holdings up to 5 ha make 50 pct. of the number of all private forest holdings. Such small-scale forestry is a result of restitution process, which is still ongoing. It is expected that private forests will make pct of the total forest areas after completion of the reform. The state forests are managed by 42 state forest enterprises and 1 national park. The present private forest ownership structures possess serious problems in term of competitiveness of forest sector as such, as it results into difficulties ensuring sustainable and economically viable management of forest resources. The network of forest owner s cooperatives and other economic entities is developing slowly. Forest Owners Associations in Lithuania unite only a small per centage of forest owners. Moreover, most of the private forests are characterised by poor infrastructure bad quality of forest roads or in some cases even absence of forest roads. In total there are about 24 thou.. km of forest roads, i.e. about 11,3 km of roads per 1000 of ha. However, only about 6 pct of these roads are covered with gravel and could be used all year around. Thus, this means that there are only 2,8 km/1000 of roads per ha that are suitable for access all year around The poor quality of even absence of forest roads is a problem within private forests. This shortcoming results into lower economic value of forests, complicates the forest harvesting and logging. Only about 15 pct of forest owners have passed special training courses aiming at increasing their abilities and knowledge to perform sustainable forest management, about 2 per cent of forest owners are proffessional foresters. Of course, some private forests are being managed by proffessional forest owners cooperatives or private companies enagaged in forest management or state forest enterprises based on the contractual agreements. However, the biggest part of the forest owners in fact do lack forest management knowledge and experience. In addition, there is a need to promote such forest management activities in private forests that would increase the ecological and recreational value of private forests as in most cases the new forest owners focus their activities only aiming at economic benefits, i.e. generating income in the short run. One of the ways to increase the forest economic value in the long run is to promote and encourage the pre commercial thinning in the young stands, which as a result turn into higher economic value in the future. Today, due to the fact that this type of activity is costly and will only pay back in some 50 years, the forest owners are unwilling to implement it. There is a need yearly to perform commercial thining in the areas of about 5 6 thous. of ha of private young stands. Consolidated version as of 18 th September,

18 Therefore, there is a need to provide financial assistance for this type of activity in order to encourage the forest owners to invest today with the aim to receive the benefits in the future. The forest felling techniques used, especially in private forests, are outdated, mainly performed using manual labour. In 2005 the state forest enterprises had only 3 harvesters and private forest owners only about 5 and this means that there is 1 harvester for about 200 thous.ha of forests.state forest enterprises harvest about 4 pct from total harvesting using harvesters and private forest owners even smaller part of the total forest harvesting. The rest is being harvested using motorsaws. There is a need to modernise the forest harvesting techniques by supporting the private forest owners in acquiring up to date machinery in order to perform the forest harvesting in more economic manner. Most of the recreational areas are also established and being developed within forest rich areas, a lot of these forests still lack proper infrastructure, which is also important not only for the tourism development but also for the proper forest harvesting and logging. Recreational forests cover ha or 4 % of all Lithuanian forests. Non-wood products account for more then % of income from all forest products including wood. Main non-wood forest products are mushrooms, berries and fruits, medicinal plants, game meet, Christmas trees, etc. In some regions like South and South East Lithuania the value of collected mushrooms and berries is close to and even higher than that of wood. Consumption of mushrooms and berries increased considerably during 1990-es, Increasing exports of mushrooms and wild berries was the main reason for expanding market demand. During last years there was an increase in import of mushrooms and berries from Russia, Belarus and other countries. Most of imported mushroom and berries are reexported to Western countries as it can be observed from the data provided above. There are about 4,5 million ha of land used for hunting in Lithuania. Fields, shrub land and water areas account for major share in total area used for hunting 2,5 million ha. Forests occupying 2 million ha are also used for hunting; private forests here account for 0,4 million ha, the rest is state and reserved for restitution forestland. Up to 30 species of medicinal herbs are harvested in Lithuanian forests. Juniper berries, bearberry leaves and black alder bark are the most popular and of the greatest demand. Though Lithuanian forests are rich of medicinal herbs, the existing resources are insufficient to meet the current demand. Since the most of the forests occupy areas where soil productivity is low, forestry (in terms of both wood and non-wood products) provides opportunities as an important source of additional income for farmers and rural dwellers. For that reason, forestry is considered as one of diversifying activities in the rural areas able to contribute to provision of additional employment. At the moment, especially non-wood forest product utilization provides a sound basis for rural development initiatives, which aim to increase income-earning opportunities while maintaining environmental quality. Recreational activities in forests are quite often the reason for forest fires. On an annual average 70 pct of forest fires are ignited by forest visitors, 14 pct by grass burners and 16 pct by intentionally set fires. Thus, alongside with the development of recreational activities it is important to ensure implementation of fire prevention measures. On an annual average approximately 750 forest fires are registered, during which more then 350 ha of forests are damaged. In Lithuania the integral state system of fire prevention measures is applied within the forest territories, not depending on the type of ownership. Consolidated version as of 18 th September,

19 Main priorities for the future development of private forest sector, the importance of which is growing, are stipulated in the Lithuanian Forest Policy and its Implementation Strategy adopted in The main private forestry development strategic objectives are divided into short term and long-term strategic goals. The short-term forestry development objectives are: Completion of the land (forest) reform; Implementation of compensation system for the forest owners for their losses due to restrictions of forest management activities in the areas under protection; Implementation of measures on prevention of illegal cutting, timber trade and employment; Creation of legal and economic preconditions promoting associations and cooperation of the forest owners; Further development of forestry extension; Creation of legal and economic preconditions for merging small size forest holdings through land consolidation projects. The long-term main strategic objectives of Lithuanian forest policy in relation to private forestry are: Strengthening the sustainable forest management and maintaining the economic viability of the forestry sector; Establishment of new forests on private lad and implementation of afforestation programme which foresees to increase forest cover by 3 pct during next 20 years; Broader integration of private forestry development into general rural development programmes coordinating activities with rural self-governing institutions. In the Forestry Strategy of the European Union (1999/C 56/01) approved of December 15 th, 1998 is stated that European forests can best accomplish function of carbon reserve accumulation by preserving present forests and afforestation of new areas. According to Lithuanian Forestry and its Implementation Strategy, approved by the Minister of Environment of the Republic of Lithuania Order of September 17, 2002, No. 484, state and private forestry development in the context of common rural development, either increasing Lithuanian forest coverage by 3 percent in next 20 years are designated as the most important strategical goals of forestry development. Concrete volumes of newly afforestated areas for the period up to 2020 and all related measures are estimated in Aforestation Programme approved by the joint Minister of Environment and Minister of Agriculture Order of December 2, 2002, No. 616/471. It is planned during the period of to afforestate 7000 hectares of new forests every year in abandoned state and private owned land using European Union finance support. In order to create favourable terms for increasing of Lithuanian forest coverage and to ensure the supply of forest reproductive material for reforestation after felling and for afforestation of new forest areas there was approved State Forest Nurseries Modernization Programme for the period of by the Minister of Environment Order of August 26, 2003, No Environment and land management The section provides the general overview of the environmental situation in relation to soil, biodiversity, water, air and climate change, forests. Having analysed these key corner stones of the environmental sector and their role within the rural development, it became obvious that some environmental aspects such as, organic farming and afforestation, management of High Nature Value areas and landscape play a horizontal role and, in fact, contribute to enhancing more then one of the above mentioned corner stones. Soil In general, agricultural soil is not exhausted in Lithuania and in the conditions of normal farming it can produce sufficiently rich harvest. The main problems related to soil are acidity. Furthermore, soil acidity is one of the degradation processes, which limits both the diversity and productivity of soils. Such soils risk to be overgrown with deep-rooted weeds destroying the drainage systems. Liming was stopped completely around 1995 and since 1999 there is no support provided for this activity. In the Western Lithuania about 31,3 pct., in the middle of the country about 6,7 pct. and in Consolidated version as of 18 th September,

20 the Eastern part of the country 28,5 pct. of soils are be regarded as acid (ph 5.5). In the last decade the area of acid soils in the western part of the country has increased by pct. and in the eastern part of the country by 11 pct. About 17,5 pct. (2000) of utilized agricultural area is affected by erosion, resulting in a loss of valuable topsoil and productivity. The average loss of soil from agricultural land is approximately 1,8 2,5 tonnes per ha. Approx. 19 pct. of the area of the country is sensitive to deflation. Three types of soil erosion could be identified in Lithuania: water, wind, mechanical (caused by the human economical activity). The main destructive effects have water erosion, which is caused by the moving water in hilly areas. The total area damaged by erosion according the 2006 data of State Land Survey Institute is 730,9 thous. ha. (from them in agricultural land 609,0 thous. ha; in forests and other wooded land 46, 9 thous. ha; in open land without or insignificant vegetation cover 75,0 thous. ha). The main areas with soil erosion cover hilly regions of Lithuania, which is mainly in less favourable areas. 48,2 per cent of utilized agricultural area is affected by soil erosion in the Utena county, 45,5 per cent in the Alytus county. The least areas affected by soil erosion are in the Klaipėda county (2,6 per cent), Tauragė county (6,7 per cent), Šiauliai county (7,8 per cent). Therefore, there is a need to ensure proper farm management techniques on such soils, which would play a preventive role (establishment of grasslands, sowing of perennial crops, promotion of organic farming, etc). Furthermore, afforestation of such areas is given a high priority. Fig. 2 Soil erosion in Lithuania, 2006 Biodiversity Lithuania is characterized by a wide biodiversity, where species can be found. However, over 200 species of flora, 200 species of fauna and nearly 100 types of mushrooms are rare, threatened or approaching extinction and included into the Lithuanian Red Data Book. It regulates the species protection in accordance with the international practice. Consolidated version as of 18 th September,

21 During the Soviet period, biological diversity was most adversely affected by land drainage, which resulted in the drying out of natural meadows and wetlands, small rivers were canalised, river valleys were damaged, small plantations in fields and single farmsteads were removed. Changes of agricultural intensity in any direction cause a certain fluctuation of biodiversity structure and species numbers. For this reason, any farming activities had direct impact on the environment. Most often intensive farming had a negative impact on biodiversity, however in some cases abandonment of farming is as negative. After restoration of independence, the agricultural activity has, however, been decreasing as the agricultural crisis speeded-up the degradation of meadows and other open habitats. This happened due to the decline (and in many cases abandonment) of farming activities in many areas. After regaining independence, with decreased agriculture and increased fuel prices, use of meadows and pastures has significantly decreased. First of all, the less favoured areas, most often wet areas that were at further from farms, were abandoned, and these areas were the most valuable ones from the biodiversity point of view. In such wet areas that were mowed and grazed earlier, rare species of waders and other meadow birds protected in Lithuania and the EU were breeding. Currently, succession processes are taking place in those abandoned areas, and the open areas are becoming overgrown with bushes and tall grasses leading to loss of variable habitats and threatening many connected species of plants and animals. National Protected Areas Network plays an important role in biodiversity protection. The development of Lithuanian protected areas started in early 70 s with establishment of a number of nature and landscape protection reserves. Designation of new protected areas has taken place in 1992, with 30 new regional parks being established, but especially important has been the establishment of protected areas under the EC Birds and Habitats Directives, the Natura 2000 Network. The National protected area network consists today in total of 1,096 protected areas, which occupy 14,3 pct of the total territory of the country. The designation of Special Protected Areas (SPA) according to EC Birds Directive and Sites of Community Importance (SCI) according to Habitats Directive was started in Ministry of Environment submitted the updated list of SPA s and proposed SCI s to the European Commission in June The list of proposed SCI consists of 266 sites covering ha (or 9,94 pct. of Lithuania s territory). Last ammendment of the order of the Minister of Environment on approval of List of proposed SCI's has been addopted in November 2006, when new 33 sites were added to the psci list. Similarly, list of 77 SPA s covering ha (or 8,29 pct. of Lithuania s territory) was presented to EC. Currently the Natura 2000 network makes about 12 pct from the entire territory of Lithuania. However, the designation process of Natura 2000 sites is not completed yet. As regards psci s, there is expected substantial increase of these areas (both, in terms of number and area) in 2007 due to implementation of the decisions of Biogeographical seminar for the Boreal region held in December Ministry of Environment will select and proceed with the consultation and formal approval of new proposed SCI as soon as possible in order to avoid any negative changes in the areas concerned. Publication of national legal acts on designation of proposed SCI will be supplemented by info-compaign in order to improve general knowledge about Natura 2000 areas in the country. Management of information (communications to stakeholders and consultants) and tamely collaboration with the Programme implementing institutions play very important role while taking decisions on eligible actions, which may be supported through this Programme. Process of establishment of Natura 2000 network bears a dynamic character: addition of new sites to the network will be required as the result of evolving scientific knowledge on the distribution of habitats types and species, connectivity purposes, etc. In order to avoid negative changes in the areas, where such new sites according to the national data or information from Commission have to Consolidated version as of 18 th September,

22 be established, no activity will be allowed, which could deteriorate the state of those sites, at least till the moment of solving the issue. The new list of NATURA 2000 areas will be approved by the Ministry of Environment of the Republic of Lithuania untill the end of National legislation provide sufficient legal protection for such sites on the nationally approved list, i. e. protection is assured immediately and without any delay until list of sites of Community importance will be approved by the Commission. Law on Environmental Impact Assessment and related legal acts require that conditions in these sites must not be worsened due to any actions and investments planned since the site of high nature importance is on nationally approved list. MoE will inform MoA in advance on any planned new process of delimitation in order to avoid any damage to the sites Fig. 3 Sites of Natura 2000 network in Lithuania (as of 1 July 2006). From this moment when the status of the site as proposed SCI is approved by the order of the Minister of Environment the requirement of EIA for plans and projects which are not directly related to site management is obligatory. This provision of national legislation prevents significant negative impact on the sites which might occur during implementation of such plans and projects. For Natura 2000 sites the necessary conservation measures have been undertaken involving, appropriate management plans specifically designed for the sites or integrated into other development plans (e.g. state forest management plans), and appropriate statutory, administrative or contractual measures which correspond to the ecological requirements of the natural habitat type and the species present on the sites. Law on Protected Areas sets provision that all sites which meet selection criteria for Natura 2000 have to be finally protected by establishment of national protected areas there. In already existing protected areas which have been designated as Natura 2000 areas their protection regime is being curreently adjusted to the ecological requirements of habitats and Consolidated version as of 18 th September,

23 species of Community interest by means of improvement of functonal zoning and ammendments of statutes of individual protected areas. In all sites which were selected according Birds directive and had not any teritorial protection national protected areas of different categories were etablished in , except of ongoing process for 2 last sites as mentioned above. Over 76 pct. of currently proposed Sites of Community Importance are in Lithuania's protected areas. Some of these sites are protected sufficiently and management provisions are in place. On the other hand, for several sites their individual statutes have to be revised and protection regime has to be strengthened. As the European Commission has intention to approve initial list of Sites of Community Importance for Boreal region until the end of 2007 Lithuania shall undertake necessary measures to improve the protection regime of individual protected areas as well as to establish new protected areas within 6 year period. This is the provision of Art. 4.4 of the Habitats directive. Baseline of environmental restrictions on farming and forestry activities in protected areas differs depending from the type of protected area. This baseline is set in following legal acts: 1) Law on Protected Areas (Art. 7, 9, 11, 13, 15, 17, 19, 20), 2) Law on Forests (Art. 3), 3) Special Conditions on Land and Forest Use approved by the Governmental Resolution No1640 on 29 December 1996 (chapters 29, 34-47), 4) Statutes of individual protected areas aproved by the Government or Minister of Environment. Special regulatory provisions reflecting ecological requirements if species and habitats of Community Interrest are set by Governmental Reslution No 276 on 15 March 2004 (with ammendments on 19 April 2006, No 380). These regulatory provisions have to be reflected when preparing statutes of new protected area, ammendment of existing one or their management plan. Depending on the type of protected area as well as on species or habitats to be protected different combinations of restrictions for ongoing farming practice from most common 5 have been set: 1) draining or any other alterations of the hydrological regime is forbidden, 2) the ploughing meadows or re-sowing them with cultural grasses is prohibited, 3) the number of livestock units per ha in grazed areas is restricted and set to be 1 or less; 4) the earliest date of mowing meadows is determined after 15 of June, 5) using of fertilisers, pesticides or liming substances is prohibited. Similarly in the forests: depending on the type of protected area as well as on species and habitats to be protected different combinations of restrictions for ongoing forestry practice from most common 4 have been set: 1) final forest cutting operations shall be forbidden or postponed; 2) final forest cutting operations shall be carried out in non-clear cutting way; 3) additional number of living trees shall be preserved and left in clear cutting areas; 4) sanitary felling is restricted, e.g. drying trees or dead wood shall be preserved. According national legislation management plans are mandatory for all national (5), regional (30) parks and biosphere reserves (1) as they are areas of multifunctional zoning. From the point of view of regulation on the economical activities it is an advantage that functional zoning plans (which sets zone-based restrictions for agriculture and forestry) have been approved by the Government for all national and regional parks and biosphere reserve. Other types of protected areas (strict nature reserves, different types of nature reserves, biosphere polygons and recuperative plots) are not zoned. Main management measure for these territories is their individual statutes approved by the Government or the Minister of Environment and actual chapters of Special Conditions on Land and Forest Use. Consolidated version as of 18 th September,

24 In order to work out the schedule of measures for restoration and other active conservation measures in protected areas strategic management plans are being prepared for Natura 2000 areas. In the first half of 2007 in Lithuania there were 26 of such plans approved and more than 100 under preparation. Within Natura 2000 network currently there are about ha of agricultural land where restrictions on actual farming practices are set. As regards forestry, there are almost ha of forests in which forest managements practices are restricted in order to ensure protection of species or habitats, private forests in which restrictions influence their owners actual incomes make about ha.. Thus, the total private area currently to be covered by compensatory allowances (both agricultural and forestry is ha). However, the areas (both agricultural and forestry) are expected to increase by as the defining process of conservation regime within Natura 2000 areas is ongoing. It is expected that agricultural area should be covered by compensatory allowances will increase by 4 times, i. e. up to 54,000 ha. Forest area where forest management restrictions will apply is expected to increase in total up to 521,000 ha, out of which private forests in which restrictions will influence their owners actual incomes are expected to make about 91,500 ha. In Lithuania there are found 53 types of the listed habitats in the Habitats Directive Annex I (out of total 218). Most of them are subject to some kind of human activity and therefore there is a need to ensure the proper management and protection of these areas. The examples are hay and alluvial meadows, western taiga, marshes, swamps, etc. Protection of landscape and biodiversity is very closely related and contribute to each other. Lithuanian rural landscape with big areas of natural and semi natural open areas rich in biodiversity make up the biggest part of the territory. Most of the natural and semi natural meadows and pastures, all swamps, also surface water bodies are regarded as high nature value areas in Lithuania. Most of these areas are the Natura 2000 areas, thus preservation of these habitats will also ensure preservation of the typical agrarian landscape. According the inventory of natural meadows carried out in 2005 by Lithuanian Fund for Nature and Institute of Botany, there is about 42,1 thousand ha of such areas. Furthermore, there is about 81 thousand ha of wetlands. The establishment of Natura 2000 territories takes place in a participatory approach, thus, the private landowners are becoming more and more aware of their role in preserving these values. However, due to economic bearings behind, this is only possible with the financial support being provided for implementation of the required site management actions. Most of the designated Natura 2000 areas are located in rural areas, and many are dependant on high nature value farming methods that maintain habitats such as hay meadows, low intensity grazing of semi-natural vegetation, extensive cereal systems, floodplain grasslands, etc. Due to the fact that High Natural value farming systems are not always profitable for the farmer because the price that the consumer pays does not include the environmental added value that the farmer provides with low intensity/inputs as compared to the conventional farming. Thus, the EAFRD funds will be used to pay the farmer for these environmental products. The available structural funds and the Financial instrument for Environment (LIFE +) will be used for the management of Natura 2000 and biodiversity but the possibilities available within EAFRD are the most appropriate for that due to the focus on land managers as beneficiaries and the potential to support the specific land management practices. In the view of Natura 2000 territories protection, there seems to be strong needs to encourage the extensive grazing practices in order to maintain open landscape habitats. A lot of these are threatened by overgrowth changing the natural characteristics of the habitats. Some Natural 2000 territories and High nature values areas are, however, in the areas favourable for farming where Consolidated version as of 18 th September,

25 farmers are eager to intensify their production. Here actions are needed to ensure that the farming is on the level compatible with environmental requirements to secure the existing natural values Forest plays an important role in biodiversity preservation as well tourism development. About 53,5 pct of the Natural 2000 sites have been designated within the forests thus it is of utmost importance to ensure that proper and sustainable forest management practices are being implemented both in private and state forests. This applies both to the silvicultural as well as forest harvesting methods. Water Lithuania abounds in rich water resources. Open internal water bodies cover 2,6 thousand square kilometres. That accounts for about 4 pct. of the whole territory. Lithuanian is also rich in underground water resources. The total annual amount of underground water consumed constitutes only one-fourth of the amount of underground water available for use. According national legal acts it is forbidden to use pesticides in protection shore belts of water bodies. According to the monitoring data, the average concentrations of total nitrogen exceeded the maximum allowable concentration (MAC) in 43 % of monitoring sites in the rivers, ammonium nitrogen in 5%, nitrates 25%, phosphates 28%, total phosphorus 39% and BDS7 values in 12% rivers monitoring sites in Totally the average concentrations of these chemical parameters exceeded MAC of at least one of these parameters in 64 % of monitored river sites. With respect to hazardous substances concentrations, MACs were exceeded in 7,8 % of monitored river sites (at least by one of the hazardous substances) in Among those pesticides concentrations were below MAC limit, but they have been found in a certain number of rivers and lakes. The concentrations of total phosphorus and phosphates exceeded MAC respectively in 10 % and 5 % of monitored lakes in Year Total, tone insecticide fungicide beic herbicide regulator of growing of plants defoliante others ,0 7,0 159,2 42,2 858,9 125,7 0,6 3, ,6 2,6 128,4 94,1 726,5 23,7 5,8 0,5 Table 4 Utilised plant protection products, To compare 2006 with 1996 year the quantity of proceeding material is utilized 215 tones in 2006 year more than in In the period of 10 years this compose only 2 percent of increment of utilizing of plant protection products in a year. In 1996 for 1 ha of UAA it was utilized 0,3 kg of proceeding material of plant protection products, and in 2006 it was utilized 0,36 kg for 1 ha of UAA. In 2006 only 0,06 kg of proceeding material of plant protection products it was utilized more than 10 years before. Costs for mineral fertilizers in agricultural land (eur/ha), 2005 On holding less than 10,1 ha is utilized 1,3 tone of mineral fertilizers for 420 EUR/ha; On holding of size 10,1-20 ha is utilized 1,5 tone of mineral fertilizers for 493 EUR/ha; On holding of size 30,1-40 ha is utilized 2,04 tone of mineral fertilizers for 664 EUR/ha; Consolidated version as of 18 th September,

26 On holding of size 50,1-100 ha is utilized 5,5 tone of mineral fertilizers for 1792 EUR/ha; On holding of size 100,1-150 ha it is utilized 17,19 tone of mineral fertilizers for 5584 EUR/ha According national legal acts it is forbidden to use fertilizers in protection shore belts of water bodies. 1 st of February 2007 was published Order of minister No 3D-38 On the information about used fertilizers in holding. In this Order it is declared, that farmers, having more than 10 ha of UAA must present information about amount the use of mineral and organic fertilizers. From 2007 year it is foreseen to collect data about use of fertilizers in holdings in Lithuania. The average winter season concentrations of total nitrogen in Curonian Lagoon as well as in the coastal area of Baltic Sea didn t exceed MAC in The average winter concentration of total phosphorus was almost equal (0,094 mg/l) to MAC (0,1 mg/l) in 2005 in the Curonian Lagoon, while it didn t exceed MAC in the Baltic Sea coastal area. However, the Curonian Lagoon is highly eutrophicated water body as a consequence of high amounts of nutrients coming to it, nutrients collected in the bottom sediments as well as because of its natural conditions. This sensitive to pollution water body has limited exchange of water with Baltic Sea and its status directly depends on the quality and flow of Nemunas River what brings about 98 % of incoming water (Nemunas River basin covers about 75 % of Lithuania area). Water of the lagoon changes every 81 day and goes to the Baltic Sea, thus it creates environmental problems there also. The eutrophication of the Baltic Sea within the territory of Lithuania is local problem typical for the coastal area. According to the rivers monitoring and emissions data, about t of total nitrogen and of total phosphorus entered into the Baltic Sea in 2005 through Curonian Lagoon, rivers or directly discharging point sources from Lithuania (amongst that t total nitrogen and 2313 t total phosphorus was the load from Matrosovka canal that transports part of Nemunas River water into the Curonian Lagoon in Russia s Kaliningrad area). However, not all of these pollutants were generated in the territory of Lithuania about t of total nitrogen and t of total phosphorus entered to Lithuania from the abroad countries. Lithuanian point sources (accounted) pollution constituted about t of total nitrogen and 270 t of total phosphorus. According to the resent modelling results, the major part of total nitrogen and total phosphorus into the Baltic Sea come from the agriculture. The load from animal manure entering water bodies comprise about 45 %of total nitrogen and 30 %of total phosphorus, while the load from mineral fertilisers about 55 % of total nitrogen and 70 % of total phosphorus of all agriculture pollution. Therefore minimising of arable land area with the limitation on fertilising should be effective measure to reduce water pollution. According to the official HELCOM data, the average years contribution by Lithuania to the Baltic Sea with both nitrogen and phosphorus was equal to 7 % (without loads of Matrosovka canal) of all Baltic Sea countries. The implementation of the EU Nitrate Directive as well as the EU Water Framework Directive (WFD) has been given a high priority in Lithuania. Agriculture is considered as one of the key diffused water pollution sources. Out of total 790 water bodies identified for the implementation of WFD in Lithuania as the ones at risk that good status will not be achieved by 2015, 22 pct of those have been identified as bodies at risk due to impact from agriculture pollution by nutrients, organic substances. The part of these risk water bodies were identified according to the estimated data and assumptions, thus they have to be revised. The updated list of water bodies at risk because of agricultural impact and their basins territories will be determined by the end of October Environmental Protection Agency is responsible authority for this issue in Lithuania. The conversation of arable land into the perennial pastures in the basins of these risk water bodies will let to reduce phosphorus and especially nitrogen amounts going to water bodies and therefore will directly contribute to the achievement of water protection goals set up in the WFD. Moreover, the Consolidated version as of 18 th September,

27 implementation of measure will also contribute to the reduction of Baltic Sea eutrophication processes that is identified as one of the main Baltic Sea environment protection strategic goals for the Baltic Sea by HELCOM. Implementation of the provisions of the Code of Good Agricultural Practice (CGAP) is very important in order to minimise this diffused pollution thus there is a strong need to encourage farmers to use the nutrient balances, fertiliser and crop rotation as well as pesticide use plans. Lithuania has developed CGAP in 2000 and it is currently under implementation. In fact implementation of these requirements is not only of the benefit to the environment but also brings at the end the economic benefits to the farms as it results into an economical use of inputs. Thus, this is also much related to the awareness raising and know how transfer to farmers about these benefits. Lithuania uses underground water to provide the population with drinking water. Water abstraction sites in Lithuania supplying drinking water to the population in a centralised way usually abstract underground water from deep compresses aquifers and the quality of this water is suitable for drinking by all indicators. These aquifers are relatively protected from surface pollution. The dug wells to extract drinking water are mostly used in rural areas and poses problems. According to the monitoring data, over 950 thousand rural inhabitants use water of dug wells pct. of well water is polluted with nitrates exceeding maximum allowable concentration, and sometimes it amounts to 100 mg/l and more. The polluted wells are scattered evenly throughout the whole territory of the country. Main reason of pollution of the well water with nitrates is inadequate distances from the barns, dunghills, toilets, heavily fertilised orchards, and gardens. In relation to implementation of the Nitrate directive Lithuania has committed to have it implemented with the two action programmes. The first Action programme for the period will be implemented in the entire territory of Lithuania as the entire country has been designated as Nitrate Vulnerable Zone. It was approved by GoL in august This means that the whole country is designated as the Nitrate Vulnerable Zone. Beside the mandatory measures related to proper fertilisation by organic and mineral fertilisers, land use, crop rotations, the installation of proper manure/slurry storages is mandatory to be installed in the livestock farms which have more then 300 LU and in all new farms being established. Further, in the second action programme also smaller farms having above 10 LU will have to obligatory installed the manure storages. Presently most of the livestock farms do not have manure storages meeting the environmental requirements therefore the emphasis in the Action programme is put on having this requirement fulfilled. Most of manure and slurry storages will have to be installed in areas where the livestock sector is dominant. In 2003 the average livestock density in Lithuania was about 0,26 LU/per ha. Despite the variation in livestock density in different farm groups, in general the average livestock density per ha of agricultural land is far below the maximum allowed according to the Nitrate directive (1,7 LU/ha). Another problem related to water management, which is also closely related to agricultural infrastructure influencing also the farming conditions, is related to drainage management. About 80 pct of agricultural land has been drained. However, about 54 pct. of the drainage systems are out of proper functioning, about 15 pct of the drained areas are of bad or insufficient status. Almost half of the drainage systems are public (46 pct) and the 54 pct are under the private ownership. These systems have been established in the Soviet time and are large-scale drainage systems. They are not suitable for private farming conditions as they are big sized, also do not comply with the environmental requirements. Therefore, there is a need to improve the drainage systems in order both to create better conditions for the agricultural activities and to ensure the compliance to the environmental requirements. Currently there is ongoing inventory of the existing drainage systems, Consolidated version as of 18 th September,

28 their status, including their role to the environment in order to ensure that renovation of them is compatible with environmental values. The improvement of drainage systems will be done by renovation of existing drainage systems and will not influense changes of biodiversity. Air and climate After Lithuania re-established its independence, as a consequence of economical decline, emission of pollutants to the air decreased substantially. One of the main commitments in relation to improving the air quality is related to the implementation of Kyoto protocol. Lithuania signed the Kyoto Protocol in 1997 and committed itself to reduce greenhouse gas emissions into the atmosphere at global level by 8 pct. until Greenhouse gas emissions from agriculture in Lithuania consist of emissions of methane and nitrous oxide. Agriculture is the second largest source of greenhouse gases, emitting 48 pct. of all methane and 82 pct. of nitrogen oxide emissions. The emission of greenhouse gasses (equivalent to CO 2) in Lithuania has increased from 13, 9 mill. tons in 2000 year till 17,5 mill. tons in Basically the biggest amount of these gasses comes from energetics, transport and industry sectors. Notwithstanding, currently emission of greenhouse gasses amounts nearly 4 tons per habitant in the country and is one of lowest among EU member- states. National emission ceilings set for 2010 for Lithuania have been negotiated during the accession period and were set at following values: SO ktonne/yr, NO x 110 ktonne/yr, NH 3 84 ktonne/yr and NMVOC 92 ktonne/yr. Emission projections indicated that regarding growth in energy consumption and agricultural activities and taking into account of a number of national plans and strategies and the implementation EU requirements in main activities, in 2010 no additional measures will be required to meet the emission ceilings for all pollutants. The Thematic Strategy on air pollution (COM (2005) 446 final) foresees a review of NEC directive. The ceilings for SO 2, NO x, NMVOC and NH 3 will not only be reviewed, but also a new ceiling for primary PM 2,5 will be introducted. Based on calculations with RAINS programme, the following global reduction goals for the EU have been set for the year 2020 relative to the base year 2000: SO 2-82 %; NO x -60 %; NH 3-27 %; NMVOC - 51 % and PM 2, %. According to PHARE project, which was implemented in Lithuania in , data if these global reduction goals are translated to the national level for Lithuania, this would lead to the following ceilings for 2020: SO 2 7,8 ktonne/yr, NO x 19,6 ktonne/yr, NH 3 36,5 ktonne/yr NMVOC 36,3 ktonne/yr and PM 2,5 7,1 ktonne/yr. But by the mentioned above PHARE project data, which were sent to EK in 2006, full implementation of current legislation regarding climate change and emission reduction policy in Lithuania until 2020 will lead to decrease of the yearly emissions only to: SO 2 21,7 ktonne/yr, NO x 26,9 ktonne/yr, NMVOC 42,9 ktonne/yr and PM 2,5 11,7 ktonne/yr. The reduction of methane and ammonia emissions from inappropriate storage and use of fertilisers and liquid manure is one of the key objectives in implementing the Lithuanian Action programme within the framework of the EU Nitrate directive. As the majority of farms lack proper manure storage capacities, methane and ammonia emissions and outdoor pollution are quite common. Nitrous oxide emissions from agricultural soils depends directly on an amount of application of synthetic fertilizers and manure, the cultivation of nitrogen fixing crops, the introduction of crop residues into soils and soil nitrogen mineralization due to cultivation of organic soils. Thus, agricultural practices are very important in climate change mitigation. Therefore there is a need to ensure implementation of CGAP especially in the field of tilling and growing of agricultural crops as Consolidated version as of 18 th September,

29 well as in animal husbandry - setting of grassland and pastures as well as proper maintenance of them, forage preparation and storage, building of animal shelters, sustainable feeding, proper manure/slurry storages are very important in minimising the evaporation of ammonia. Forests are an important carbon sink and according to calculations made by the Ministry of Environment, forests absorb one fourth of the total carbon dioxide emissions produced by fossil fuel combustion. Forests occupy one third of the country s territory, and three fourths of this forested area is used for the production of timber. Thus, future development of forestry is of great importance in meeting the international obligations related to the reduction of gas emissions. Forests A specific problem in Lithuania is the agricultural land that is not being utilized for agricultural purposes. Over the last decade, a growing number of agricultural lands have been abandoned and not cultivated for some time. This development is mainly a result of the land reform process and the adaptation by the agricultural sector to the open market. Currently, approximately 500, ,000 ha of agricultural land is not farmed and majority of this land could be abandoned. Afforestation process and increase of forest cover is important due to different reasons e.g. considering environment protection, landscape ecology criteria, maintenance of cultural heritage as well as factors of rational use of agricultural land and fulfilment of other ecological, social and economic functions. The following benefits arising from afforestation of agricultural land to the society and environment within the framework of rural development are the most important: It creates an important infrastructure for recreational purposes Forests play an important carbon sequestration role It is an effective measure for underground and of surface waters protection Reduces water and wind erosion The Lithuanian Forestry Policy and its Implementation Strategy outlines that the aim is to increase the forest cover in the coming 20 years with 3 pct. In order to fulfil this objective the Lithuanian Forest Increase Programme for was approved in November The aim of the programme is to foresee the forest cover increase tendencies and volume in Lithuania taking into consideration the factors influencing the process, forest structure and its territorial distribution as well as accumulated experience in Lithuania and other countries. The biggest areas have so far been afforested by State forest enterprises (in ,113 ha) whereas the afforestation by private landowners still is not at a satisfactory level. The reason therefore is that private landowners are still examining all the opportunities ahead of them in terms of engagement and possible income coming with the support from EU. Afforestation is the decision, which has no backward action, and since once afforested land becomes forest forever. The real support for afforestation has emerged only in 2005 through implementation of the Rural Development Plan for and could be regarded as a new opportunity for land use. Therefore, the landowners are just now seeing the real benefits of turning their land, especially the one not suitable for agricultural purposes, into forests. State land survey institute is responsible for the preparation of land use plans for afforestation These plans are approved by regional municipalities. Up to land use plans for afforestation have been developed and are being used as key documents in issuing permits for afforestation, the remaining 6 will be prepared by the end of The criteria for designating areas suitable for afforestation have been revised in order to ensure that forests are established in those areas where it is of utmost importance from an economical, ecological and social point of view. Thus, criteria ensuring the protection of biodiversity, soil, ground and surface waters, cultural heritage and Consolidated version as of 18 th September,

30 landscape values are being taken into consideration in addition to the soil fertility factor, which used to be the main deciding factor for designation of such areas. Bio energy Use of bio energy sources is an important aspect in combating climate change. Main objectives of the national energy policy indicated in Law on Energy and the National Energy Strategy for Lithuania, among others include the use of RES, which by 2010 should account for 12% in the overall energy mix. Electricity production from RES is based on appropriate legal and economic framework. Law on Electricity provides for promotion and priorities for electricity produced from RES, local and waste energy sources. In 2003 it was established that by % of overall electricity consumption should account for electricity generated from RES. The Law on Bio fuels and other related fuels, adopted 5 February 2004 provides for the promotion of the generation and usage of the bio fuel. The National Energy Efficiency Programme (the Programme has been implemented since 1992) and the main directions of its implementation, approved by the Government of the Republic of Lithuania, includes among others, the goals of efficiency of the use of energy resources and energy, reduction of the impact on environment, coordination of the measures of energy efficiency with the requirements of the EU directives and other international documents. The program for promotion of the production and use of bio fuel was approved by Order No 1056 of 26 August 2004 of the Government of the Republic of Lithuania. The purpose of the programme is to ensure the development of production and use of bio fuel from local raw materials. The programme is to be implemented in The development of bioenergy production have positive influence on the quality of environment and also helps to achieve general targets of agri-environment. The demand of grain for bioethanol production will be obtained not by increasing grain areas but practically by increasing productivity and utilizing the grain still usable for export. The demand of rapeseed for biodiesel production will be fulfilled by increasing productivity of land and partly by enhancing rapeseed areas, using for this purpose abandoned land, without damage to the environment. Bio energy potential and production In 2003 local and renewable energy resources accounted 8% of all the resources. Wood fuel: in 2003 wood fuel accounted for 7,82 terawatt-hour (TWh). Overall wood fuel potential for energy generation is 9,8 TWh. It is projected to increase the use of wood fuel for energy production by 9,5 TWh by 2010 and by 9,8 TWh by Straw: the annual yield of straw is 2,5 million tons. In 2003 energy from straw accounted for 0.04 TWh. The overall potential for energy production from straw is 3,59 TWh. It is projected to increase the energy production from straw by 0,5 TWh in 2010 and by 1,5 TWh by Municipal waste: the annual yield of municipal waste is approximately 1 million tons. However, in 2003 the municipal waste was not used for energy production. The overall potential of energy production from the municipal waste is 0,8 TWh. It is projected that in 2020 the usage of municipal waste for energy production will account for 0,46 TWh. Biogas: in 2003 energy production from biogas accounted for 0,02 TWh. The overall potential for energy production is 0,4 TWh. It is projected to increase the usage of biogas for energy by 0,14 TWh by 2010 and by 0,28 TWh by Consolidated version as of 18 th September,

31 Bio fuel: main raw materials for bio fuel production in Lithuania are grain and rape seeds. The potential of the resources for energy production is 2,25 TWh. It is projected that the usage of bio fuel for energy production in 2010 and 2020 will account for 0,72 TWh. Future activities Implementation of the projects on the usage of RES is of importance to Lithuania as the usage of RES will reduce fuel import and CO2 and other emissions and create more jobs in the field. In order to speed up the usage of local and renewable energy resources for energy production, it is necessary to invest more in energy production equipment and promote introduction of new technologies ensuring efficient usage of the resources and adapt the existing equipment to use local and renewable energy resources. Introduction of new technologies to use local and renewable energy resources for energy production is possible with the assistance and experience of companies of other countries. In cooperating with experts of other countries, science research activities related to the review and evaluation of the potential of the resources in different regions of the country could be implemented Rural economy and quality of life Rural population, employment and incomes in rural areas One third of the total Lithuanian population lives in rural areas. There is a tendency of migration from rural areas which in 2005 was minus 1,4 thousand people although not as big as from urban areas (7,4 thousand). It is normally older people that move to rural areas, while young people between years especially women move away from the rural areas. Therefore, rural population is ageing and every fourth rural resident is above 60 years old. The education level of the rural population is inferior to that of the urban population (table XX). Secondary educated employed rural residents dominates in structure of employed rural population, however share of high educated employed rural residents increased 2,4 pct. from 8,7 pct in 2001 till 11,1 pct in High educated employed urban resident s share 2,6 times exceeded the same indicator in rural areas. This indicates that people living in the rural areas are less prepared for undertaking various business activities, the development of competitive agriculture or work in other industries. Life-long learning term determines population, aged 25 to 64 years. In rural areas life-long learning has been increasing but still remains inferior to that amongst urban population. It is characteristic to the rural areas that the number of employed is less than in cities and this number continues decreasing; also, comparative unemployment among young people is rather great. The number of employed residents in rural areas during the period of decreased by more than 6 percent. The employment rate of residents of rural areas 2005 amounted to 59 percent of all y.o. residents living in rural areas (in a city 62 percent), unemployment rate approximately 10 percent (in a city approximately 12 percent). Youth until 25 y.o. unemployment rate amounted to 20.3 percent (national average 22.5 percent). In about half of the rural working force worked within the agriculture, forestry, hunting, and fishery sector employment in this area decreased from 51,4 pct till 42,6 pct. A rather large number of people engaged in agriculture are determined by the low efficiency of labour, partial employment and small farms. Lithuanian agriculture has therefore large possibilities to increase labour efficiency by consolidating and specializing farms. A foreseen consequence is though that the Consolidated version as of 18 th September,

32 number of directly employed in agriculture will decline and will thus possible enhance the unemployment in especially rural areas. People being out of work should therefore have possibilities and suitable conditions to develop new traditions in agricultural production and to engage in new business activities as well. The over-dependency within the rural areas in terms of income from agricultural activities is though considered a weakness of the rural sector having a negative impact on successful implementation of rural development strategy. However, positive tendencies have been observed in the labour market, as more of the rural population tends to switch to jobs in the services sector and other alternative activities that are of crucial importance in aiming to minimize the dependency of rural population from agriculture. The second largest employer is the service sector having 35,9 pct. employed in This is followed by the industry and construction sector (21,5 pct.). In 2005, the unemployment rate among rural population was 9,7 pct. while the national average rate was approximately 11,4 pct. Employment rate as well as the labour activity rate in rural areas is lower then in urban areas. Forest sector employs 5,2 pct from the total employment. However, this number does not fully reflect employment in forest sector, as many people are temporarily involved in forestry activities, particularly private sector. Besides that, many enterprises of other sectors (construction, agriculture, forestry, etc.) also are involved in timber processing activities (saw milling, carpentry, etc.), which is not their main activities and therefore workers of these companies are not covered by this statistics. Most of the primary forest industries are located in rural areas and therefore this economic activity is perceived as a potential for increase of working places and further income in rural areas. For that purpose enhancement of forestry sector to promote the benefits of social, economical and ecological nature is set as one of the priorities in rural development. Consequently, lower activity and employment of the rural population leads to lower average disposable household income, when compared to the urban population. Disposable income in rural areas is by 24,7 pct. lower than in urban areas. However, it has increased in last few years due to direct payments. Low income of rural population determines the structure of expenses. The majority goes for food about 54 pct of income in rural areas whereas in urban areas 34 pct is spent on food. Urban dwellers derive two thirds of their income from employment and this is two times more then rural population. Rural people also received a higher per centage of their income from social benefits. However, slight positive trends in increase of income amongst rural dwellers from employment are being observed and this shows rural residents possibilities to seek for alternative activities, if income from primary agriculture is not satisfactory. Thus, data on employment and household income reveal major weaknesses in Lithuanian rural areas: firstly, there is a high dependence on one source of income, namely agriculture; secondly, there is a high unemployment rate among young people in rural areas; and thirdly, a widening income gap between rural and urban households can be identified. Less Favoured Areas In Lithuania there is a broad regional variety defined by natural, social, economic, traditional and other factors. These factors directly or indirectly influence productivity, efficiency, income and Consolidated version as of 18 th September,

33 ultimately quality of life in a given region. In these regions where the income from agricultural activity is declining, the agricultural activity must be supported also with the objective on protection of the environment and rural area itself. For identification of the areas there had been approved Order on National Procedure for the Selection of Less-Favoured Areas. To the less-favoured areas there had been attributed the areas in which agricultural losses are incurred due to the limited productivity of agricultural land and the density of rural population is below the country s average or the viability of rural communities is worsening. The total lessfavoured area covers ha or 43,5 pct. of the total utilized agricultural area in Lithuania. Fig. 4 Less Favoured areas in Lithuania, 2006 Gender analysis in rural areas Gender balance both in urban and rural areas in Lithuania is quite stable (fluctuations are only about 0,1 pct). Consolidated version as of 18 th September,