EX-POST EVALUATION OF RURAL DEVELOPMENT PLAN FOR FINAL EVALUATION REPORT

Transcription

1 EX-POST EVALUATION OF RURAL DEVELOPMENT PLAN FOR FINAL EVALUATION REPORT Date: 16 December 2008

2 The Ex-Post evaluation of the Rural Development Plan was conducted in fulfilment of service provision contract No 8P-358 of 7 August 2008, concluded between the Ministry of Agriculture of the Republic of Lithuania and Public Company Europos socialiniai, teisiniai ir ekonominiai projektai (ESTEP). With reference to the contract, we hereby deliver a final evaluation report drawn up in accordance with the common structure for the reports specified in Annex II of the European Commission s Guidelines for the Evaluation of Rural Development Programmes supported from the European Agricultural Guidance and Guarantee Fund. The final evaluation report was approved on 16 December 2008 by the Ministry of Agriculture of the Republic of Lithuania and Steering Committee. 2

3 CONTENT ABBREVIATIONS... 5 GLOSSARY OF EVALUATION TERMS... 6 EXECUTIVE SUMMARY INTRODUCTION OVERVIEW OF THE RDP THE PROCESS OF EX-POST EVALUATION OF THE RDP EVALUATION METHODOLOGY ELEMENTS OF THE EVALUATION METHODOLOGY Evaluation questions, criteria and indicators Evaluation methods Sources of information ISSUES AND LIMITATIONS RELATED TO THE EVALUATION METHODOLOGY CONTEXT OF THE RDP IMPLEMENTATION AND SOCIO-ECONOMIC DEVELOPMENT NEEDS SOCIO-ECONOMIC AND ENVIRONMENTAL CHANGES EVALUATION OF THE RDP RELEVANCE ANALYSIS OF FINANCIAL INPUTS OF THE RDP COMPARISON OF THE FINANCIAL INPUT PLAN AND FACT FINANCIAL EFFECTIVENESS EVALUATION OF RDP MEASURE IMPLEMENTATION EARLY RETIREMENT Intervention Logic of the Measure Implementation of the Measure Analysis of Common Evaluation Questions Analysis of National Evaluation Questions LESS-FAVOURED AREAS AND AREAS WITH ENVIRONMENTAL RESTRICTIONS Intervention Logic of the Measure Implementation of the Measure Analysis of Common Evaluation Questions AGRI-ENVIRONMENT Intervention Logic the Measure Implementation of the Measure Analysis of Common Evaluation Questions AFFORESTATION OF AGRICULTURAL LAND Intervention Logic of the Measure Implementation of the Measure Analysis of Common Evaluation Questions SUPPORT FOR SEMI-SUBSISTENCE FARMS UNDERGOING RESTRUCTURING Intervention Logic of the Measure Implementation of the Measure Analysis of Common Evaluation Questions Analysis of National Evaluation Questions MEETING STANDARDS Logic behind the Measure Intervention Implementation of the Measure Analysis of Common Evaluation Questions TECHNICAL ASSISTANCE

4 Implementation of the Measure Analysis of Common Evaluation Questions ASSESSMENT OF THE OVERALL RDP EFFECTIVENESS AND IMPACT RDP IMPACT: ANALYSIS OF COMMON CROSS-CUTTING EVALUATION QUESTIONS IMPLEMENTATION OF THE RDP SPECIFIC OBJECTIVES SUSTAINABILITY OF THE RDP RESULTS RDP ADMINISTRATION SYSTEM IMPACT OF THE IMPLEMENTING ARRANGEMENTS ON THE RESULTS OF THE RDP EVALUATION OF SEPARATE ELEMENTS OF THE RDP ADMINISTRATION SYSTEM THE EXTERNAL COHERENCE OF THE RDP RDP COMPATIBILITY WITH THE CAP AND CROSS-CUTTING EU POLICIES AND PRIORITIES RDP COMPATIBILITY WITH OTHER SUPPORT PROGRAMMES AND NATIONAL SUPPORT MEASURES CONCLUSIONS AND RECOMMENDATIONS REFERENCES ANNEX 1. TECHNICAL TASK FOR EVALUATORS ANNEX 2. REPORT OF THE SURVEY OF BENEFICIARIES ANNEX 3. A LIST OF RESPONDENTS OF INTERVIEWS CONDUCTED DURING THE EVALUATION ANNEX 4. A REVIEW OF FINANCIAL AMENDMENTS OF RDP ANNEX 5. OVERVIEW OF PAYMENT AMOUNTS UNDER MEASURES OF RDP ANNEX 6. AMENDMENTS OF RULES OF ADMINISTRATION OF THE MEASURES OF RDP ANNEX 7. COMPATIBILITY AND INTERACTION OF THE RDP AND NATIONAL SUPPORT MEASURES WITH THE KEY AGRICULTURAL AND RURAL DEVELOPMENT ISSUES

5 ABBREVIATIONS AIRBC Agricultural Information and Rural Business Centre ASAIS Agricultural Support Administration Information System CAP Common Agricultural Policy DP Direct payments EAFRD European Agricultural Fund for Rural Development EAGGF European Agriculture Guidance and Guarantee Fund EAGGF Guarantee Section of the European Agriculture Guidance and Guarantee Guarantee Section Fund ESU European size unit EU European Union FADN Farm Accountancy Data Network GAV Gross added value GDP Gross domestic product HDA Highly disadvantaged areas LAAS Lithuanian Agricultural Advisory Service LDA Less disadvantaged areas LFA Less favoured areas LU Livestock unit MoA Ministry of Agriculture NPA National Paying Agency RCA Revealed comparative advantage index RDF Rural Development Fund RDP Rural Development Plan RDPAIS Rural Development Programme Administration Information System RUCD Regional Unit of the Control Department SAPARD Special Accession Programme for Agriculture and Rural Development SFMIS Structural Funds Monitoring Information System SME Small and medium-sized enterprises SPD Single Programming Document SRSP Special Rural Support Programme SWOT Strengths, weaknesses, opportunities and threats UAA Utilised agricultural area WFD Water Framework Directive 5

6 GLOSSARY OF EVALUATION TERMS Coherence - assessment of whether a better complementarity or synergy could be found within a programme and in relation to other programmes. The internal coherence refers to the correspondence between the resources allocated to a programme and its objectives. The external coherence refers to the adequacy between the evaluated programme and other related programmes, e.g. Community aids for early retirement and related national state aids. Comparison group a group of entities not involved in the programme (in case of this evaluation excluded applicants) to assess the gross-effect and deadweight effect of the programme in comparison with those who are involved in the programme (beneficiaries). Complementarity a phenomenon where several public interventions/programmes (or parts of one programme) contribute to the fulfilment of the same objective. Context indicators indicators describing the socio-economic programme environment and its changes in the whole geographical area covered by the programme. These indicators usually are macroeconomic and strategic activity indicators, which are little dependent on the programme impact in the short-term period. Counterfactual situation - situation which would have occurred without the public assistance. Also referred to"policy-off" situation. Criterion characteristic on which a judgement can be based. The criterion must be explicitly defined. A measure would usually be judged on several criteria. Indicators are then defined for each criterion. Deadweight effect change in the situation of the beneficiary that would have occurred even without the public funding. For instance, an agricultural holding might have invested even in the absence of co-finance. Deadweight usually arises as a result of inadequate delivery mechanisms, which fail to target the intervention's intended beneficiaries sufficiently well. Effectiveness assessment of the effects in relation to the objectives of the evaluated programme. An action will be effective when the objectives have been attained. Efficiency assessment of the achieved effects in relation to the inputs (financial or administrative) mobilised; i.e., how economically have the inputs been converted into outputs, results or impacts. Could the same result have been achieved with less resources, or more results with the same resources? Evaluation criteria attributes, qualities or effects of a programme financed by the European Union, which help to make evaluation questions and evaluate the programme. The main evaluation criteria are relevance, efficiency, effectiveness, impact, utility and sustainability. Evaluation questions formulated questions to be answered by the evaluator when evaluating the programme. There are two types of evaluation questions: common evaluation questions formulated by the European Commission, and specific evaluation question, which are relevant in a context of a particular programme of a Member State. Exogenous factor external factors partly or entirely responsible for the changes observed. The evaluation must take into account such factors (e.g., market prices) in order to assess the net effect of the assisted action. 6

7 Gross-effect change observed consequently to the implementation of the measure. The observation of gross effect is not sufficient to conclude properly on the effects imputable to the assisted action. Deadweight, displacement and substitution effects, exogenous factors must also be assessed to conclude on the net effects. Impact effects of the programme in the medium or long term. There can be expected, unexpected, positive or negative impacts, depending also on the influence of exogenous factors. Direct and indirect beneficiaries can be affected by the impacts of a programme. Indicator (for the purpose of this evaluation) information in a form suitable for assessing or indicating the effects of an assistance. They help in quantifying and simplifying information about complex phenomena. They represent more than the raw data on which they are based. Measurement produces raw data, which may be aggregated and summarized to provide statistics; statistics can be analyzed and re-expressed in the form of indicators, which fed into the evaluation or decisionmaking process. Intervention logic a relation between objectives and tasks set by public institutions, financial resources allocated to these objectives and the results and impact reached in the implementation cycle of the programme/its part or project. Leverage effect fact that the public funding induces private spending among the beneficiaries. Net effect effect completely imputable to the programme. Term additionality is also used to describe the net effect identified during the evaluation. Programme a strategic planning document, which lays down different organised activities aimed at fulfilling public policy objectives. Programme indicators indicators describing socio-economic effects of the programme implementation. Programme indicators are divided into physical (output, result, impact) and financial indicators. It should be emphasised that programme indicators are related to the population or territory affected by the programme. Relevance appropriateness of the objectives of a programme in relation to the sectoral needs and socio-economic problems to which the programme should respond. Sustainability effects are sustainable when they last in the long term, and after the end of the programme. Synergy effect the effect describing a positive situation of public financial assistance where the coordination of several different interventions and intercomplementarity create a better general result (a situation where 2+2=5). Utility the fact that the impacts observed correspond to sectoral needs and to identified socioeconomic problems. Unlike relevance, utility does not appreciate the intervention by referring to the objectives of the assisted actions. 7

8 EXECUTIVE SUMMARY The Rural Development Plan (the RDP) for Lithuania for the period has been drawn up in fulfilment of the obligations of Council Regulation (EC) No 1257/1999. The RDP was approved by the European Commission by decision C(2004) 2949 of 3 August The overall objective of the RDP was to increase the competitiveness of the Lithuanian agricultural sector, create opportunities to diversify activities and promote environmental protection. To implement the overall objective, the RDP laid down seven measures: Early retirement, Less favoured areas and areas with environmental restrictions, Agri-environment, Afforestation of agricultural land, Support for semi-subsistence farms undergoing restructuring, Meeting standards and Technical assistance. Moreover, some funds were allocated for complementary national direct payments and financing of the SAPARD surplus. In fulfilment of the requirements of the said Council Regulation, an ex-post evaluation of the Lithuanian RDP was conducted. The evaluation was carried out in August December 2008 by a team of five experts on the basis of a service provision contract concluded between the Managing Authority (the Ministry of Agriculture of the Republic of Lithuania) and Public Company ESTEP. According to the Terms of Reference, the overall objective of the evaluation was to examine the achievement of the RDP objectives and tasks, identify outputs, results and impacts of the RDP implementation. Evaluation methodology and constraints When assessing the RDP implementation, the primary aim was to answer all relevant common evaluation questions formulated in the European Commission s guidelines and specific evaluation questions specified in the Terms of Reference of the Contracting Authority. Given the different nature of evaluation questions, the evaluation also assesses the key aspects of the assistance, i.e. relevance, efficiency, effectiveness, impact and sustainability. The evaluation was based on secondary data (information from the monitoring system, programming documents, national statistics office) and complemented with primary data (representative sampling method was used both for beneficiaries survey and excluded applicants survey; also in-depth interviews with stakeholders were carried out). Data analysis was based on input/output analysis, counterfactual situation analysis, quantitative analysis, economical and social impact assessments. In the course of the evaluation exercise some methodological constrains appeared. Limitations related to the evaluation data collection determined the preciseness of a further analysis and evaluation findings. One of the most significant data limitations was the issue of the programmelevel monitoring data availability and credibility. In addition, a lack of some baseline context indicators as well as too general national statistics on agriculture sector also limited some evaluation tasks. Main evaluation findings When assessing the relevance of the RDP, the first step was to analyse the general situation in rural development and agriculture during the period of the RDP implementation, eco-social and environmental changes in examined in comparison with the initial situation, i.e. the year of In general, the RDP implementation period four years was not long enough for significant structural changes to emerge, therefore, the programme objective set and measures selected have remained relevant in this essence. Most changes in this period are considered to be positive: rapidly growing economy in the country generally, material and direct foreign investments, investment support for the modernisation of farms and scope of direct support, work efficiency in agriculture, sales of agricultural and food products in local and foreign markets, enhanced international competitiveness, increased household 8

9 income of rural inhabitants and farmers, employment and educational level of rural inhabitants, expanded land used for agricultural production, etc. One of less beneficial changes was a slow farm restructuring process a relatively small average farm size and a slow rural population and farmers age turnover process, can still be identified. On the one hand, the said socio-economic changes were being pursued by implementing the RDP measures; and on the other hand, they influenced the implementation of the RDP themselves. It is essential to note that certain positive changes, especially the increased amount of direct assistance for agriculture and rural development, conditioned an unexpected impact on the RDP implementation, i.e. it promoted the use of agricultural land for agricultural production, thus, creating competition for measures supporting alternative land use and becoming of the reasons, why some of the output and result indicators planned were not achieved. The said factor a greater extent of the EU financial assistance for agriculture and rural development after the accession to the EU (direct payments, support allocated under measures of the Single Programming Document (SPD), competition among measures of the same RDP) and weaker capacities to absorb the support in new-type activities (e.g. Early retirement, Support for semi-subsistence farms undergoing restructuring ) also influenced the financial implementation of the RDP. EUR million from the EAGGF was allocated to the implementation of seven RDP measures (additional EUR million was allocated to complementary national direct payments and EUR million to the financing of the SAPARD surplus; in total EUR million was allocated to the RDP implementation) % of the funds allocated to the RDP measures were absorbed by the end of November A high absorption level of funds was ensured by the reallocation of funds among measures. During the period evaluated, five reallocations of funds were made, which increased the financing for LFA and areas with environmental restrictions, Agri-environment and Meeting standards and decreased it for Early retirement, Afforestation of agricultural land and Support for semi-subsistence farms undergoing restructuring. A rather flexible attitude towards the reallocation of funds among measures ensured the absorption of financial assistance; however, it limited financial interventions into solving some agricultural problems, reduced the planned RDP impact on the promotion of alternative income in rural areas and faster farm restructuring. The financial effectiveness (actual spending in relation to forecast expenditure) of the RDP priority Alternative use of agricultural land, which has only one RDP measure assigned ( Afforestation of agricultural land ), was only 26%; the financial effectiveness of the priority Farm restructuring implemented by Early retirement and Support for semisubsistence farms undergoing restructuring measures amounted to 60%, meanwhile the financial effectiveness of the remaining measures assigned to the priority Less favoured areas and areas with environmental restrictions significantly exceeded the plan and reached even 134%. Taking into account financial absorption lessons, the evaluator recommends to give a greater priority to the achievement of the objectives planned rather than the absorption of financial funds in implementing the programme of a new programming period. It is recommended firstly to consider possibilities to take actions that would promote the activity of applicants and contribute to the fulfilment of objectives (for example implement targeted information campaign, provide consultancy services for potential beneficiaries, review conditions of assistance, etc.), while the reallocation of financial resources should be made only in case of reasonable changes in rural development needs. The assessment of the effectiveness and impact of the RDP implementation was initiated with the analysis of the implementation of individual RDP measures. It includes intervention logic schemes of measures; assessment of the extent to which the logic (provided in the RDP) was justified during the implementation; examines the level of the achievement of the indicators set for 1 31 December 2008 was foreseen to be the final payment date. 9

10 measures; identifies reasons for the success or limitations of the measure implementation; answers all relevant common evaluation questions and additional national questions (programme specific questions) following the European Commission s guidelines for the evaluation. The first three RDP measures were implemented in a rather big scope and conditioned positive changes. Even though the Measure Early retirement did not achieve all physical and financial outputs planned, its implementation is considered to be effective. The financial assistance reached a fairly big part of the target group (more than 20.5 thousand agricultural household owners older than 55 years old), the measure conditioned some positive changes in the demographical situation in Lithuanian rural areas by encouraging elderly farmers to retire from farming and maintaining/attracting young people to rural areas; it ensured income for elderly farmers having decided to retire from farming and contributed to the restructuring of the milk sector by inducing small milk producers to terminate the production. Nevertheless, the Measure Early retirement had a rather small impact on the farm consolidation and increase of average farm size, because an average size of land released was relatively small (3.56 ha). The implementation of the Measure Less favoured areas and areas with environmental restrictions had a significant intervention impact by maintaining farm income (it partially reimbursed the lost income for farmers in less fertile areas and areas with environmental restrictions), ensuring the use of agricultural land, maintaining population in these areas and enhancing the environment (meeting rules of Good Farming Practice). The area of ha, which amounts to 68% of the total area ascribed to the LFA, was supported under the measure. On the other hand, due to external causes (Natura 2000 system was not completed), the measure had a significantly smaller impact on meeting environmental restrictions for protection of birds in Natura 2000 territories than planned the planned indicator pertaining to the number of beneficiaries has been achieved only by 11%. The implementation of the Measure Agri-environment positively influenced the improvement of the environment and income maintaining/improvement (the indicator of a number of beneficiaries was achieved and the indicator of the area assisted exceeded by 1.5 time). Moreover, this measure especially contributed to the organic farming development in Lithuania. In the period of the number of organic farms increased by more than 4 times (from 700 to 2855 ha, 80% of which received the support under this measure) and the area certified multiplied by more than 5 times. In the course of the evaluation it was identified that this development had been artificially promoted by relatively big payments for organic farming. As a result, due to a reduction of payments in period , there is a risk of a decrease in a number of organic farms. The other two RDP measures Afforestation of agricultural land and Support for semisubsistence farms undergoing restructuring were implemented in a quite smaller scope than planned (the first measure achieved around 40% of the indicators set for beneficiaries and the area afforestated, meanwhile only one fifth of the projects planned was implemented under the second one). Little popularity of the measures was conditioned by the whole of many factors, one of which was relatively small amounts set to the maximum support. The maximum amount eligible for the support under the Measure Afforestation of agricultural land was not revised, even though it was necessary, given the increase in prices of the related works and goods. A maximum support limit for the aid under the Measure Support for semi-subsistence farms undergoing restructuring stipulated in Regulation No 1257/1999 was foreseen (EUR 1000 per annum), however, the evaluation showed that for the target group it was insufficiently economically motivating. The implementation of the Measure Meeting standards had a significant positive impact on the competitiveness of the milk sector in Lithuania by realising investments necessary for the compliance with requirements of the Council Directive 92/46/EEC for milking, collection of raw milk and its transport (Milk Directive) and, thus, increasing milk quality (the aid was provided to install equipment in cowsheds, where 18% of all cows in Lithuania were kept). Funds of the measure were also used to inhance the environment by reducing pollution by nitrogen compounds, i.e. by realising investments necessary for the compliance with requirements of the Council 10

11 Directive 91/676/EEC concerning the protection of waters against pollution caused by nitrates from agricultural sources (Nitrate Directive). Although it is difficult to assess the impact on the environment at the moment, it may be maintained that it will not be the same as expected after the programme implementation since not all beneficiaries under the this measure will meet requirements of the Nitrate Directive (the number of beneficiaries which will not construct the dung storage facilities /liquid manure reservoirs required under the EU requirements till the end of the project implementation period could account for about 10% of all beneficiaries). When assessing the general impact of the RDP, common cross-cutting evaluation questions as well as the implementation of the specific objectives of the RDP were examined. The support under the RDP directly contributed to the maintenance of and increase in farmers income to a large extent: almost 250 thousand applicants 2 received payments under 6 RDP measures, certain measures ( Meeting standards, Afforestation of agricultural land ) partially contributed to the maintenance of/increase in non-farmers income, too. Furthermore, the financial assistance, especially to diary or organic farmers, had an indirect positive effect on income through the market. Most applications supported under the RDP measures contributed to the solving of the rural development issue arising threat to the environment directly or through the farming restrictions set. Even though the RDP was not aimed at increasing employment, its implementation had a certain impact in this respect mostly by ensuring the employment of beneficiaries. The RDP influenced the position of agricultural products in the market by increasing the capacity of the dairying production and improving the quality of agricultural products (mostly in the area of milk and organic products). The RDP had also a beneficial impact on a number and structure of rural population. The Measure Early retirement promoted favourable changes in the farmers age turnover process. Relatively small changes emerged in the process of the farm consolidation, which were rather little influenced by the implementation of Early retirement and Support for semi-subsistence farms measures. In the evaluation of the quality and efficiency of the RDP administration system a special attention was paid to the contribution of implementing arrangements to maximising the intended effects of the programme. The following aspects of the RDP implementing arrangements were analysed with reference to the criteria of common evaluation questions formulated in the European Commission s guidelines: (a) it was identified that in the course of the RDP implementation there was rather high-level complementarity of measures: more than 12 thousand applications were submitted for support under actions of several measures; moreover, several measures contributed to the implementation of overall programme level objectives (they promoted the improvement of farm structures, environment protection, increased income); on the other hand, internal competition emerged among certain measures; (b) eligibility criteria and differentiation of maximum amount eligible for the support under certain measures helped to direct programme funds expediently, however, priority criteria that could ensure greater efficiency of the support were not employed; (c) in the course of the implementation of investment-type measures positive leverage effects were indicated; (d) the dead-weight effect was present in most cases of the RDP measures, however, it was not high (approximately 20% of beneficiaries would have implemented the assisted actions even without the RDP support; some of them (around 30%) would have done it in a smaller scope). The assessment of the quality and efficiency of other elements of the administration system (distribution of functions among institutions, human resources, administration procedures, information activities, transparency of the RDP administration system, partnership principle and implementation monitoring system) took into account that institutions had very little experience in administrating such support. The RDP was the first EU support programme for rural development after Lithuania s accession to the EU (the first experience was gained during the administration of the SAPARD funds). The administrating institutions made attempts to solve the problems faced in the course of the implementation and constantly improve the RDP administrative and implementing 2 It should be noted that this is a total number of applicants under different measures and the real number of beneficiaries is lesser because there were cases when applicants received payments under several measures. 11

12 arrangements, therefore, a lot of changes were made and shortcomings of the administration system eliminated during the RDP implementation period of Other changes were made in the implementing arrangements of the Rural Development Programme for taking into account the lessons of the previous period. One of the more significant limitations, which burdened the evaluation process, was the monitoring system, which was not sufficiently operative and userfriendly. Even though the development of the system itself is considered to be an important achievement in comparison with the implementation of the SAPARD programme, it is proposed to continue a further improvement of this system in order to create possibilities to present the data accumulated in it in different analysis sections and involve additional indicators in the monitoring, which are necessary to answer common evaluation questions. In summary, given the analysis of the RDP administration system and practice of other countries, it is suggested for the period to consider a possibility to focus functions and responsibility of the Managing Authority in one unit of the MoA, namely the Rural Development Department. To summarise results of the RDP implementation, socio-economic and environmental impact as well as impact on the realisation of the Community s priorities, it could be stated that more than one measure of the RDP had effect on the factors important for the whole EU (a size and age structure of rural population, employment, income, position of agricultural products in the market and environmental protection). It shows that the RDP conditioned a broad impact and contributed to the realisation of the overall objectives of rural development (although the impact on different factors had a different extent). A positive impact on various factors indicates that the RDP implementation also promoted the realisation of other EU horizontal priorities and policies the Lisbon Strategy, environmental objectives (Göteborg commitments, Directive 2000/60, Kiyoto Protocol), sustainable development priority and socio-economic cohesion. Different programmes of the Lithuanian Overall Rural Development Strategy (RDP, SPD and SRSP) were virtually coordinated and contributed to the solving of the key rural development issues in the country a small average farm size, low income and insufficient income sources, lack of technologies, threat to the environment. To strengthen a consistent strategic attitude to the solving of rural development issues, it is recommended to increase the compatibility of different aid measures, which would help to avoid competition among them. 12

13 1. INTRODUCTION This section of the Evaluation Report presents the common and contextual information about the RDP : it reviews the overall national rural development strategy, the context for the implementation of the RDP, actions previously implemented in this field, also the structure, objectives, measures, the budget, and the overall implementation system of the RDP. This section also presents the evaluation process itself, i.e. the objectives and tasks, the scope of the evaluation, the evaluation criteria and questions as well as previous evaluations of the RDP Overview of the RDP The RDP has been analysed in the general context of the agricultural and rural development policy on the European and national level. The Overall Rural Development Strategy of Lithuania for which aimed at elimination (or at least mitigation) of the key agricultural and rural development problems was expressed in the form of the following three main strategic guidelines for rural development: Modernisation of the agricultural production sector; Improvement of the standard of living of the rural population through investments in engineering, business and service infrastructure, and capacitating the rural people to engage in alternative activities and earn additional income; Development of human resources to adapt to changes in the countryside and promotion of initiative of rural communities. These three guidelines were further transformed into specific priorities and measures to be implemented within different programmes, namely, the Single Programming Document (SPD), the Rural Development Plan , and the Special Rural Support Programme (SRSP), which is funded nationally. Even though consolidated in three different programming documents, the measures under which the Community and national financial support was provided were coordinated and complementing one another to ensure interplay of proposed actions, synergy of the rural development, and sustainable results 3. They were also in line with the priorities of the Common Agricultural Policy (CAP) of the European Union (EU). The RDP was drawn up by the Ministry of Agriculture of the Republic of Lithuania (MoA) in and approved by the EC Decision C (2004) 2949 of 3 August This strategic document was drawn up to implement the provisions of Commission Regulation (EC) No. 817/2007 laying down detailed rules for the application of Council Regulation (EC) No. 1257/1999 of 17 May 1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF). With the help of the RDP Lithuania was gradually implementing the EU rural development policy in the course of , which aimed to create a competitive and EU market-oriented agriculture, promoted the diversity of economic activities of the rural community, and ensure the compatibility of agricultural activity with environmental requirements. RDP measures. To achieve the overall objective of the RDP, the programme laid down seven measures, the first four of which (see more detailed information below) were provided by Regulation No. 1257/1999 and the remaining three were additionally proposed by the EC and 3 Ministry of Agriculture of the Republic of Lithuania. Lithuanian Rural Development Plan , p

14 included into Treaties of Accession 4 in order to solve the specific needs of new Member States (transitional measures). Moreover, as it was agreed during EU negotiations, the Government of the Republic of Lithuania resolved to allocate a certain share of the rural development budget for direct payments. RDP measures: Measure 1: Early retirement; Measure 2: Less favoured areas and areas with environmental restrictions; Measure 3: Agri-environment; Measure 4: Afforestation of agricultural land; Measure 5: Support for semi-subsistence farms undergoing restructuring; Measure 6: Meeting standards; Measure 7: Technical assistance; Measure 8: Complementary national direct payments. Other measures provided by Regulation No. 1257/1999 were included into Priority 4 Rural and fisheries development of the Single Programming Document (SPD). Objectives and tasks of the RDP. The logical connection between the overall objective, specific objectives, and measures for their achievement is presented in the figure below. Figure Hierarchy of objectives of the RDP Overall RDP objective Competitive agriculture, possibilities for diversification of activities, environment protection Specific objectives of the RDP Improvement of agricultural structures and competitiveness; Improvement of income for farmers; Improvement of the environment; Provision of alternative sources of income through afforestation programme, compatible with the protection of natural values; Alleviation of cash flow constraints in the semi-subsistence farms; Assistance for agricultural producers to cover the expenses they must incur to take their production and livestock farming facilities into compliance with applicable EU requirements; Awareness raising and capacity building. MEASURES Measure 1: Measure 2: Measure 3: Measure 4: Measure 5: Measure 6: Less favoured Early retirement areas and areas Agrienvironment of semi- Afforestation Support to Meeting standards with Representative of Evaluation and Impact Assessment agricultural Unit of DG EMPL, subsistence European Commission environmental (TBC) restrictions land farms undergoing Sources: Ministry of Agriculture of the Republic of Lithuania. Lithuanian Rural Development restructuring Plan Measure 7: Technical assistance The RDP was developed for the Republic of Lithuania, and its measures (except for the measure Less favoured areas and areas with environmental restrictions ) are applied all over Lithuania. The measure Less favoured areas and areas with environmental restrictions was only implemented in certain areas, which were designated and approved together with the RDP, and in the designated Natura 2000 territories. 4 Chapter IXa of the Treaty of Accession of Lithuania to the EU 14

15 Budget of the RDP. The total budget of EUR million was allocated to achieve the overall and specific objectives of the RDP for , including the EU assistance amounting to 80%, i.e. EUR million 5. The detailed distribution among the RDP measures is provided in the table below (later during the implementation of the RDP the reallocation of funds among the measures were made). Table Distribution of funds among RDP measures, Measure Total public funds, million EUR % allocated for each measure Total EU contribution Early retirement Less favoured areas and areas with environmental restrictions Agri-environment Afforestation of agricultural land Support for semi-subsistence farms undergoing restructuring Meeting standards Technical assistance Complementary national direct payments Other (SAPARD surplus) TOTAL Sources: Ministry of Agriculture of the Republic of Lithuania. Lithuanian Rural Development Plan Beneficiaries. Applicants meeting the requirements for the participation provided by the description of the RDP measures were entitled to the assistance allocated for individual measures. Farmers were the key target group. Eligible applicants are specified by individual RDP measures in the table below. Table Eligible applicants by the RDP measure Measure Early retirement Less favoured areas and areas with environmental restrictions Agri-environment Eligible applicants Farmers or farm employees meeting the age criterion (from 55 years old to retirement age). Small dairy farm holders were defined as a separate target group; it was granted to Lithuania to accept applications from these holders beyond retirement age (with a set age limit amounting to 70 years old). Natural or legal entities registered in the Agriculture and Rural Business Register as agricultural operators Natural or legal entities registered in the Agriculture and Rural Business Register as agricultural operators and managing at least one hectare of utilized agricultural area by the property right, or lease (for at least 5 years), etc., at the date of submission of the application. 5 In comparison with other rural development programmes under implementation in , the funds allocated for the implementation of the RDP accounted for the major share of the support to rural development, i.e. EUR million for the RDP (implementation of 7 measures), EUR million for the SPD, and EUR million for the SRSP. Moreover, projects under the SAPARD programme were also being implemented during this period, even though the deadline for submitting applications was

16 Afforestation of agricultural land Support for semi-subsistence farms undergoing restructuring Meeting standards Technical assistance Farmers, agricultural companies, cooperative companies (cooperatives) or other agricultural operators, any other natural persons managing agricultural land on the basis of property right, also municipalities. Applicants are grouped into the following two categories: (1) farmers and associations, and (2) other. The first category includes applicants meeting the RDP requirements, while applicants that cannot be classified as farmers and associations are classified as other. Farmers with an agricultural holding registered in the Agriculture and Rural Business Register of the Republic of Lithuania, which meet the RDP requirements for the farm size. The RDP provides that applicants intending to switch from semi-subsistence farms to commercial farms must submit a business plan. Farmers, agricultural companies, cooperative companies (cooperatives) or other agricultural operators registered as provided by legislative acts and engaged in agricultural activity, which declared crop areas and/or livestock for at least one year prior to the date of submission of the application. Ministry of Agriculture, National Paying Agency Sources: Ministry of Agriculture of the Republic of Lithuania. Lithuanian Rural Development Plan Applications. After the European Commission approved the RDP in 2004, the implementation of the RDP commenced. EUR million was allocated for implementation of seven measures of the RDP. During the four years ( ), almost 370,000 applications were collected, i.e. almost 122,000 applications were received in 2004, more than 123,000 applications were submitted in 2005, almost 122,000 in 2006, and 178 application in The majority of applications 329,143 were submitted under Measure 2 Less favoured areas and areas with environmental restrictions. Meanwhile, Measure 4 Afforestation of agricultural land had the least number of applicants, as only 1,436 applications (0.4% of the total number of applications) were submitted under this measure. Administration system. The administration structure of the RDP consists of three key authorities, i.e. the Ministry of Agriculture (hereinafter referred to as the MoA), the National Paying Agency (hereinafter referred to as the NPA) and the Monitoring Committee (see Figure ). Figure Subordination scheme in implementing the RDP Ministry of Agriculture Monitoring Committee National Paying Agency Sources: Ministry of Agriculture of the Republic of Lithuania. Lithuanian Rural Development Plan

17 The MoA was responsible for effectiveness and correctness of the RDP management; it also operated as the creator of rules, examined complaints of the applicants, and acted as the Secretariat of the Monitoring Committee (which was responsible for supplying information to the Monitoring Committee on the status of the RDP implementation). The NPA was responsible for the daily implementation of the programme and updating the MoA on the implementation progress. The NPA was commissioned to ensure appropriate allocation of funds and sound financial control in accordance with strategic priorities and measures as well as selection criteria and procedures set out in the RDP. Some of the authorisation and control functions were delegated to regional branches of the NPA (Regional Units of the Control Department, hereinafter referred to as the RUCD), situated in all 10 counties of Lithuania. These units were responsible for the collection of applications for assistance and complaints regarding payments. Also, they performed the on-the-spot checks before submitting all collected information to the central subdivision of the NPA. The aim of the Monitoring Committee was to assess the overall effectiveness and quality of the RDP implementation. The Monitoring Committee was also in charge of the achievement of the RDP results and the objectives set for the different measures, as well as the utilisation of the funds allocated to these measures. Amendments of the RDP. The Monitoring Committee was authorised to adjust the RDP and submit the amendments to the European Commission for approval. During the RDP implementation in Lithuania, the following amendments were made to the RDP: in 2006, two amendments were made in relation to the measure Early retirement ; in 2007, an amendment was made in relation to the description of payments under the measure Afforestation of agricultural land, and two amendments that adjusted sanctions applied in case of beneficiaries failing to meet requirements under measures Meeting standards and Agri-Environment were made in Five financial amendments were also adopted, which reallocated funds among measures: two amendments were approved in 2007, and three amendments were approved in Table Comparison of the allocation of funds among the measures of the RDP: original allocation of funds, and the allocation of funds following the latest amendment of the RDP Measure Original allocation of assistance, million EUR Allocation of assistance following the latest amendment of the RDP, million EUR EU Total contribution Total EU contribution Early retirement Less favoured areas and areas with environmental restrictions Agri-environment Afforestation of agricultural land Support for semi-subsistence farms undergoing restructuring Meeting standards Technical assistance Complementary national direct payments Other (SAPARD surplus) TOTAL Sources: Ministry of Agriculture of the Republic of Lithuania. Lithuanian Rural Development Plan and Communications on financial amendments to rural development programming documents provided by Lithuania to the European Commission Previous actions. For the purpose of the evaluation of the RDP implementation, it is important to note that such type of the EU-supported programme based on compensatory allowances (except for 17

18 Measure 5 Support for semi-subsistence farms undergoing restructuring and Measure 6 Meeting standards ) was implemented in Lithuania for the first time. Prior to the EU accession in 2004, Lithuania started receiving EU assistance for agriculture and rural development under the Special Accession Programme for Agriculture and Rural Development (hereinafter referred to as the SAPARD) the objective of which was to promote applicant countries preparation for the implementation of the Common Agricultural Policy and participation in the common market. The financial assistance of EUR million was allocated for implementation of this programme, which was successfully used. However, the majority of assistance measures implemented under the SAPARD programme were of an investment nature, and their continuity was assured in through implementation of the SPD. SAPARD programme for Lithuania provided for the following measures: Measure 1 Investments in agricultural holdings ; Measure 2 Improving processing and marketing of agricultural and fishery products ; Measure 3 Development and diversification of economic activities, providing for multiple activities and alternative income ; Measure 4 Improvement of rural infrastructure ; Measure 5 Afforestation of agricultural lands and improvement of forest infrastructure ; Measure 6 Environmentally friendly agricultural methods ; Measure 7 Vocational training ; Measure 8 Technical assistance, information and publicity campaign. Two measures set out under the SAPARD programme, i.e. Afforestation of agricultural lands and improvement of forest infrastructure and Environmentally friendly agricultural methods, were also provided in the RDP for the period (Measure 4 Afforestation of agricultural land and Measure 3 Agri-Environment ); but these SAPARD measures had not been implemented 6. However, Lithuanian did have a certain specific experience in implementing some of the measures of the RDP since similar activities were supported under national programmes. First of all, farming in less favoured areas has been supported since 1997: the reorganisation of agricultural activities in these areas received financial assistance from the Rural Support Fund (hereinafter referred to as the RSF), and starting with 2002 compensatory allowances and direct payments for declared area planted with certain crops in less favoured areas were paid to farmers under the Special Rural Support Programme. Upon commencement of implementation of the RDP, the national support plan was suspended, and compensatory allowances were disbursed to farmers under the RDP. Agri - environmental measures were also supported: the pilot programme for transition to organic agriculture was developed in and operated by the Tatula Fund (in 1997 reorganised into the Tatula Programme, the purpose of which was to encourage farmers to engage in organic agriculture); support for implementation of investment programmes and subsidising of organic farms was provided by the RSF (and later under the SRSP). A project is being implemented in the Rusnė Island under the programme carried out by the Lithuanian Fund for Nature; the project aims to manage abandoned grasslands on the Rusnė Island in order to make them more suitable for breeding and migratory birds; encourage environmentally sound and sustainable agriculture; promote environmental ecological education among local people; and develop ecotourism. There were also some efforts and initiatives for afforestation of the state and private agricultural land, and the objectives of afforestation were provided in the National Programme for Development of Forests; however, these efforts failed to achieve the set objectives. The slow increase of the forest area on the state land was prevented by unfavourable afforestation provisions set out in legislation 6 SAPARD measure Afforestation of agricultural lands and improvement of forest infrastructure was extremely unpopular among the applicants: only three applications were submitted, yet no aid agreement was signed. Meanwhile, the implementation of measure Environmentally friendly agricultural methods did not even start as a result of the delay of its accreditation process. Ex-post evaluation report of the National Programme for Agriculture and Rural Development (SAPARD) for Performed by Public Organization European Social, Legal and Economic Projects, 19 December

19 as well as the never-ending land reform; meanwhile, owners of private forests had insufficient knowledge and information on the matter; besides, no aid was provided for afforestation activities. The aid under the RDP for afforestation was expected to help in the implement of national objectives during the programming period. 19

20 1.2. The Process of Ex-post Evaluation of the RDP Previous evaluations and the need for ex-post evaluation. Articles 43(1) and 49 of Council Regulation (EC) No. 1257/1999 on support for rural development from the EAGGF set out the requirement to evaluate rural development programmes and measures planned therein according to the usual EU practice 7 : the rural development programme must be evaluated during different stages of the programme cycle, i.e. it is subject to ex-ante, mid-term, and ex-post evaluation. Council Regulation (EC) No. 1260/1999 provides that the purpose of ex-ante evaluation is to provide a basis for preparing the development plans, mid-term evaluation examine the initial results of the assistance and the use made of financial resources, while ex-post evaluation shall cover the utilisation of resources and the effectiveness and efficiency of the assistance and its impact and shall draw general conclusions. Considering the shorter period for implementation of the RDP of Lithuania 8, no mid-term evaluation was necessary; however, ex-ante evaluation was performed and the conclusions of the evaluator were included into the text of the RDP, while the executive summary of the evaluation report was presented in the annex to the RDP. Ex-ante evaluation was performed by the independent evaluator in January-March The evaluation emphasised that the RDP for the period was substantially improved in comparison with the SAPARD project of October 1999, while the description of the initial situation, the SWOT analysis, and the quantification were very well prepared. It was also established that the RDP covered important and major rural needs and problems of Lithuania. However, the following main deficiencies of the RDP have been identified: (1) insufficient ranking of disparities/problems; (2) analysis of previous results could be elaborated and used more proactively in the current programming stage; (3) the expected impacts and results could be presented in a more systematic way following the hierarchy of objectives as recommended by the Commission; (4) reflections on capacity to absorb assistance in the rural areas, administrative capacity in the MoA and the NPA, and marginal utility of the funds used for rural development could ensure that these aspects are taken into consideration in the programming phase; (5) the general readability of the RDP could be improved by carrying out some editorial improvements that tighten up the structure and the clarity of the RDP 9. With due consideration to the identified deficiencies, 47 recommendations were provided for the Ministry of Agriculture. The RDP states that due consideration was given to all recommendations provided by the evaluator and that the programme was improved. The ex-post evaluation is mandatory according to Lithuania s obligations to the European Commission, more specifically to the European Agricultural Guidance and Guarantee Fund. The ex-post evaluation report on the Lithuanian RDP shall form a part of the synthesis report on the Rural Development Programmes implementation that the Commission has to prepare based on reports of all Member States. The ex-post evaluation report on the Lithuanian RDP must be prepared and submitted to the Commission within two years after the completion of the programme period, i.e. by 31 December Apart from the regulatory requirement, the benefits of evaluation must also be emphasised: on the one hand it increases the accountability and transparency with regard to responsible authorities, and on the other hand, improves the implementation of the programmes by contributing to informed planning and decision concerning needs, delivery mechanisms and resource allocation. 7 Consolidated by Council Regulation (EC) No. 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds. 8 In the case of 15 Member States these programmes covered the period of ; meanwhile, the programmes of the new Member States (that acceded to the EU only in 2004) were significantly shorter, i.e. they covered the period of Ministry of Agriculture of the Republic of Lithuania. Lithuanian Rural Development Plan , p

21 Objectives and tasks of the evaluation. According to the specific Terms of Reference developed by the Contracting Authority (Annex 1), the overall objective of this evaluation was to examine the achievement of the RDP objectives and tasks, identify results, social and economic impact and impact of the RDP implementation on the implementation of Community priorities. Ex-post evaluation also seeks to report to the EU and the public on the utilisation of public resources, the management of the RDP and formulate recommendations regarding the management of future EUfunded programmes. For the purpose of this objective and with due consideration to the guidelines approved by the European Commission for the evaluation of rural development programmes for supported by the EAGGF and the Terms of Reference of the Contracting Authority, the following eight specific tasks of the ex-post evaluation were developed: 1. To assess the extent of the implementation of RDPs overall and specific objectives, social, economic and environmental impact, utility and sustainability. To establish how social, economic and environmental situation or its individual characteristics (e.g. the structure and competitiveness of farms, farmers income, etc.) changed during the implementation of the RDP. Also, to determine the relevance of overall and specific objectives of the RDP to the economic and social development needs of Lithuania. 2. To examine the allocation of resources by priorities and measures, allocation dynamics in the course of the the programme implementation, to assess the financial effectiveness (actual spending in relation to forecast expenditure). To establish the compliance of the resource allocation planned at the beginning of the programming with the objectives of the RDP, to identify reasons behind reallocation; also, to examine the financial effectiveness, i.e. compare resources allocated to the RDP and resources actually disbursed, and analyse the difference. 3. To assess the quality and efficiency of the RDP administration system. To analyse the relevance and effectiveness of the administration system as well as control and monitoring systems: to assess support administration procedures approved by the national legislation; also, the rules, the distribution of functions among institutions, the provision of information to applicants, the transparency of the RDP implementation process and the monitoring system, as well as identify strengths and weaknesses of the administration system and to provide examples of good practice. 4. To assess the RDP compatibility and interaction with the CAP, other EU cross-cutting policies and priorities as well as national support measures. To establish how the implementation of the RDP contributed to realisation of the Lisbon Strategy, Göteborg commitments, the Kiyoto Protocol, also sustainable rural development priorities, the principle of equal opportunities, and socio-economic cohesion. 5. To assess each individual RDP measure (the total of 7 measures) relying on common evaluation criteria. To assess the relevance, efficiency, effectiveness, impact, utility, and sustainability of RDP measures while analysing the overall, specific and operational objectives of measures expressed as output, result and impact indicators. 6. To describe the amendments of the RDP and assess the impact of these amendments on target groups, objectives, and indicators of measures. 7. To provide examples of good practice during the implementation of RDP measures. 21

22 8. To provide conclusions and recommendations. To summarise the RDP implementation, discuss the sustainability of the implementation system, and provide recommendations regarding the trends of rural development for Implementation of these objectives during the course of analysis seeks to provide answers to main evaluation questions, which the ex-post evaluation of the RDP classifies into common evaluation questions (formulated by the European Commission in co-ordination with Member States and provided in the guidelines for the evaluation of Rural Development Programmes for supported by the EAGGF) and specific/national evaluation questions that are important for the specific national programme (formulated in the Terms of Reference of the Contracting Authority). The main evaluation questions are discussed in more detail in Evaluation questions, criteria and indicators of this report (the said section also provides a detailed list of evaluation questions by evaluation criteria). Subject and scope of the evaluation. The subject of the evaluation shall be the implementation of the RDP and its administration system. The RDP consisted of 7 measures, the four of which were provided by Council Regulation No. 1257/1999: (1) early retirement; (2) less favoured areas and areas with environmental restrictions; (3) agri-environment; (4) afforestation of agricultural land. Chapter IXa of the Treaty of Accession provided three more rural development measures for the transitional period: (5) support for semi-subsistence farms undergoing restructuring; (6) meeting standards; (7) technical assistance. Complementary national direct payments and the financing of the SAPARD surplus, being complementary composite parts of the RDP, should also be mentioned; however, based on the evaluation guidelines of the EC, the ex-post evaluation shall assess the implementation, outputs, results and impacts of only seven rural development measures. As provided by the evaluation guidelines of the EC, the evaluation must cover the period of ; however, considering the fact that the implementation of the Lithuanian RDP commenced later, i.e. in 2004, the analysed period shall start in Furthermore, considering the fact that applications under one of the measures ( Afforestation of agricultural land ) were also accepted in 2007 and assistance funds had to be disbursed by the end of 2008, the evaluation shall cover the period ending at the end of Geographically, the evaluation shall cover the entire territory of Lithuania, as the RDP was implemented on the national level (except for the RDP measure Less favoured areas and areas with environmental restrictions, which was implemented only in certain regions). Evaluation plan and human resources. Ex-post evaluation services were provided over the period of four and a half months, i.e. from 7 August 2008 (the date of the signature of the service agreement) to 22 December Five key stages of the ex-post evaluation of the RDP were identified: (1) structural (3 weeks); (2) monitoring / data collection (3 weeks); (3) data analysis (5 weeks); (4) assessment / formulation of conclusions and recommendations (4 weeks); and (5) final (4 weeks). Considering a rather short evaluation period, evaluation activities of some stages were performed concurrently. The evaluation was performed by the team of five experts: the first evaluator (expert) / Team Leader Dr. Klaudijus Maniokas (ESTEP), the second evaluator (expert) Agnė Miseliūnienė (ESTEP), the third evaluator (expert) Heidi Skov Andersen (Capacent Epinion, Denmark), the fourth expert Vlada Vitunskienė (Lithuanian University of Agriculture), the fifth expert Jurgita Lukaševičienė (ESTEP). Some of the activities, i.e. the survey of beneficiaries and excluded applicants, were subcontracted, i.e. delivered by the social research company TNS Gallup. 10 The evaluation was performed during the second half of 2008; therefore, it does not cover the entire year

23 2. EVALUATION METHODOLOGY This section of the evaluation deals with methodological basis of the ex-post evaluation of the RDP and presents specific methodological tools methods used for data collection, analysis and formulation of conclusions. Evaluation questions, criteria and methods were selected with reference to the methodology for the evaluation of rural development programmes recommended by the European Commission. At the end of this section methodological issues and limitations, which were faced by the evaluators and partially affected the scope and explicitness of the evaluation, are provided Elements of the Evaluation Methodology The European Commission has drawn up methodological guidelines for the evaluation of the support for rural development in the programming period of The following two key documents prepared by the European Commission s Directorate-General for Agriculture and Rural Development are related to the ex-post evaluation of the RDP: - Guidelines for the Evaluation of Rural Development Programmes supported from the European Agricultural Guidance and Guarantee Fund; - Information note Ex-Post Evaluation of Rural Development Programmes These guidelines describe important methodological evaluation tools, which were consistently followed when conducting the ex-post evaluation of the Lithuanian Rural Development Plan Reference to European Commission s methodological evaluation instruments and coordination of the evaluation progress with the Contracting Authority helped to ensure reliable and quality evaluation results. Given the specific objectives and tasks (specified in Section 1.2 of the report), four main elements of the RDP ex-post evaluation methodologies are distinguished: Common evaluation questions ( cross-cutting and chapter-specific evaluation questions) and programme-specific evaluation questions (in the interests of clarity, hereinafter referred to as national questions); Evaluation criteria; Evaluation methods; Sources of information/data. Further this section of the evaluation discusses the elements of the evaluation methodology outlined. Firstly, the key evaluation criteria and evaluation questions are presented, evaluation methods provided and finally the most important sources of information indicated. It should be noted that the whole of evaluation methods is a consistent evaluation basis where properly coordinated methods are used. 11 Mid-term evaluation was not obligatory for Lithuania due to a shorter programme implementation period, i.e

24 Evaluation questions, criteria and indicators The following types of evaluation questions were distinguished: Common evaluation questions, which are relevant at the EU level and divided into: o Cross-cutting evaluation questions programme-level questions; o Chapter-specific evaluation questions measure-level evaluation questions; Programme-specific questions or national evaluation questions, which are relevant at Lithuanian level and divided into: o Cross-cutting evaluation questions programme-level questions; o Chapter-specific evaluation questions measure-level evaluation questions. Common evaluation questions are laid down in the European Commission s evaluation guidelines. A questionnaire of common evaluation questions is aimed at drawing evaluators attention to a number of issues important at the European Community level. Common evaluation questions are additionally subdivided into cross-cutting and chapter-specific evaluation questions. The set of common evaluation questions with criteria and indicators consists of 57 chapter-specific questions and 6 cross-cutting questions in total. The European Commission has formulated respective judgement criteria and indicators to answer these questions. In case of the Lithuanian RDP, 7 measures were being implemented, for the assessment of which respective chapter-specific evaluation questions, criteria and indicators have been used. All six cross-cutting evaluation questions formulated by the European Commission were answered in order to assess the impact of the RDP implementation. Programme-specific questions (hereinafter national evaluation questions) are also integrated together with common evaluation questions. These questions are formulated by the Member State itself with reference to national needs and peculiarities of the national rural development programme. In case of the ex-post evaluation of the Lithuanian RDP, national measure evaluation questions additionally formulated and national programme evaluation questions provided in the Terms of Reference of the Contracting Authority were analysed. Evaluation tasks laid down in the Terms of Reference were implemented by answering evaluation questions. Evaluation questions (common and national) are divided by tasks as follows: Table Distribution of evaluation questions by evaluation tasks Evaluation task Evaluation questions I. To assess the extent of the implementation of RDP overall and specific objectives, socio-economic and environmental impact, utility and sustainability To what extent has the socio-economic and environmental situation changed in (changes in baseline context indicators of RDP)? How and to what extent has the RDP implementation effected changes and how have they effected the RDP implementation? Have the RDP objectives met the main needs of the socio-economic development of Lithuania? Transv. 1. To what extent has the programme helped stabilising the rural population? Transv. 2. To what extent has the programme been conducive to securing employment both on and off holdings? Transv. 3. To what extent has the programme been conducive to maintaining or improving the income level of the rural community? Transv. 4. To what extent has the programme improved the market situation for basic agricultural and (or) forestry products? Transv. 5. To what extent has the programme been conducive to the 24

25 II. To examine the allocation of resources by priorities and measures, allocation dynamics in the course of the programme implementation, to assess financial effectiveness (actual spending in relation to forecast expenditure) III. To assess the quality and efficiency of the RDP administration system IV. To assess the RDP compatibility and interaction with the CAP, other EU cross-cutting policies and priorities as well national support measures protection and improvement of the environment? To what extent have the farm structure and competitiveness changed? To what extent has the RDP objective to provide alterative income sources through the afforestation programme been implemented? To what extent has the RDP objective to reduce difficulties related to a lack of investment funds in semi-subsistence farms been implemented? To what extent has the RDP objective to cover costs that agricultural producers experienced while trying to meet the EU requirements been implemented? To what extent has the RDP objective to strengthen capacity and information been implemented? What is probable sustainability of the RDP results in ? Has the fund allocation foreseen at the beginning of the programming period met the RDP objectives set and needs of potential applicants? How has the fund allocation been changing in the course of the whole programming period? What reasons have conditioned the reallocation? What is financial effectiveness (actual spending in relation to forecast expenditure)? Transv. 6. To what extent have the implementing arrangements contributed to maximising the intended effects of the programme? Has the RDP administration system been properly created? Has it been functioning properly (sufficiency of qualified personnel, its adequacy to perform the functions ascribed, administration quality, efficiency of administrative costs)? Have the functions been property distributed among institutions? To what extent has the partnership principle been implemented? Has provision of information to applicants regarding a possibility to receive support been assured and, if so, was it effective? Have the support administration procedures been proper and effective? Has the process of the RDP implementation been transparent? Has the monitoring system of the RDP implementation been sufficient and effective (data accumulation system, monitoring activity)? What are the strengths, weaknesses and good practice examples of the administration system? What is the system sustainability in ? To what extent has the RDP implementation contributed to the realisation of the Lisbon Strategy (job creation)? To what extent has the environmental objectives been integrated in to the RDP and how has the Plan contributed to the realisation of the following cross-cutting policies: - Göteborg commitments to halt biodiversity loss; - Water policy measures stipulated in Directive 2000/60 EC; - Objectives of the Kiyoto Protocol to reduce climate change? Has the RDP secured the implementation of the priority of sustainable development in rural areas? Has the RDP contributed to the implementation of the principle of equal opportunities? Has the RDP contributed to the socio-economic cohesion, i.e. the reduction of differences between the EU citizens and misbalance in territorial development? 25

26 5. To assess the relevance, efficiency, effectiveness, impact, utility and sustainability of the RDP measures in examining overall, specific and operational objectives expressed as ouput, result and impact indicators To what extent have the RDP complementarity and compatibility with the SPD measures, national support measures been secured? Chapter-specific evaluation questions: RDP Measure 1 Early Retirement IV.1. To what extent has aid for early retirement contributed to the earlier transfer of farms? IV.1.A. To what extent has the aid for early retirement contributed to the earlier transfer of farms, in particular, to what extent has there been synergy between early retirement and setting-up of young farmers in terms of an earlier change of holders? IV.2. To what extent has the economic viability of the remaining agricultural holdings improved? IV.3. Was the income offered to the transferors appropriate in terms of encouraging them to abandon farming and subsequently offering them a fair standard of living? National question: To what extent has the measure implementation influenced the strengthening of human capital in the agricultural sector? RDP Measure 2 Less Favoured Areas and Areas with Environmental Restrictions V.1. To what extent has the scheme contributed to: (i) offsetting the natural handicaps in LFAs in terms of high production costs and low production potential, and: (ii) compensating for costs incurred and income foregone in areas with environmental restrictions? V.2. To what extent have compensatory allowances helped in ensuring continued agricultural land use? V.3. To what extent have compensatory allowances contributed to the maintenance of a viable rural community? V.4.A. To what extent has the scheme contributed to the protection of the environment by maintaining or promoting sustainable farming that takes account of environmental protection requirements in LFAs? V.4.B. To what extent has the scheme contributed to the protection of the environment by increasing the implementation and respect of environmental restrictions based on Community environmental protection rules? RDP Measure 3 Agri-Environment VI.1.A. To what extent have natural resources been protected in terms of soil quality, as influenced by agri-environmental measures? (reduction in soil erosion and chemical contamination)? VI.1.B. To what extent have natural resources been protected in terms of the quality of ground and surface water, as influenced by agri-environmental measures? VI.1.C. To what extent have natural resources been protected (or enhanced) in terms of the quantity of water resources, as influenced by agri-environmental measures? VI.2.A. To what extent has biodiversity (species diversity) been maintained or enhanced thanks to agri-environmental measures through the protection of flora and fauna on farmland? VI.2.B. To what extent has biodiversity been maintained or enhanced thanks to agri-environmental measures through the conservation of high nature-value farmland habitats, protection or 26

27 enhancement of environmental infrastructure or the protection of wetland or aquatic habitats adjacent to agricultural land (habitat diversity)? VI.2.C. To what extent has biodiversity (genetic diversity) been maintained or enhanced thanks to agri-environmental measures through the safeguarding of endangered animal breeds or plant varieties? VI.3. To what extent have landscapes been maintained or enhanced by agri-environmental measures? RDP Measure 4 Afforestation of Agricultural Land VIII.1.A. To what extent are forest resources being maintained and enhanced through the programme particularly by influencing land use and the structure and quality of growing stock? VIII.1.B. To what extent are forest resources being maintained and enhanced through the programme particularly by influencing the total carbon storage in forest stands? VIII.2.A.To what extent have the assisted actions enabled forestry to contribute to the economic and social aspects of rural development by maintenance and encouragement of the productive functions on forests holdings? VIII.2.B. To what extent have the assisted actions enabled forestry to contribute to the economic and social aspects of rural development by maintenance and development of employment and other socio-economic functions and conditions? VIII.2.C. To what extent have the assisted actions enabled forestry to contribute to the economic and social aspects of rural development by maintenance and appropriate enhancement of protective functions of forest management? VIII.3.A. To what extent have the assisted actions contributed to the ecological functions of forests by maintenance, conservation and appropriate enhancement of biological diversity? VIII.3.B. To what extent have the assisted actions contributed to the ecological functions of forests by maintenance of their health and vitality? RDP Measure 5 Support for Semi-Subsistence Farms Undergoing Restructuring TM.1.1. To what extent has the support facilitated the move into the market for semi-subsistence farms in the country? TM To what extent has the support facilitated the move into the market for semi-subsistence farms in the country? TM.1.3. To what extent has the support reduced the structural disparity between the agricultural sector of Lithuania and the agricultural sector in the EU-15 Member States? National question: To what extent has aid for semi- subsistence farmers contributed to the transferring farms into commercial farms? In particular, to what extent has there been synergy between support to semi- subsistence farming and early retirement in terms of farm restructuring? National question: To what extent has aid for semi- subsistence farmers contributed to the transferring farms into commercial farms? In particular, to what extent has there been synergy between Support to semi- subsistence farming and Investments in agricultural holdings (from SPD) in terms of farm restructuring? RDP Measure 6 Meeting Standards 27

28 6. To describe changes in the RDP and assess their impact on target groups, objectives and indicators of measures TM To what extent has the support helped farmers to adapt to standards established by the Community? TM To what extent has the support reduced the structural disparity between the agricultural sector of the country and the agricultural sector in the EU-15 Member States? RDP Measure 7 Technical Assistance TM To what extent has the support improved capacities concerning the management, monitoring and evaluation of rural development programmes? What amendments to the RDP have been made and how have they affected the target groups, objectives and indicator of the measures? When answering common and national evaluation questions, four main evaluation criteria recommended by the European Commission were applied: (i) relevance; (ii) effectiveness; (iii) efficiency; (iv) impact, and (v) sustainability. The relevance criterion analysis whether the RDP met agricultural and rural development needs. The effectiveness criterion evaluates whether and to what extent objectives of the programme and measures have been implemented. The evaluation also analysed the financial effectiveness of the RDP, i.e. a ratio between funds actually paid and funds foreseen in the RDP. The efficiency assessment included a qualitative analysis of the RDP implementing arrangements and administration system, i.e. the analysis of the management of human resources, time and other factors. The impact criterion examined direct and indirect programme effects. The evaluation of the programme in terms of sustainability analysis if there is a long-term sustainability of achieved results and impact. The figure below illustrates the evaluation by criteria. Figure Evaluation criteria of the EU support programmes/measures Source: European Commission s draft on the ex-ante evaluation

29 Evaluation methods The evaluation methods were selected with reference to the type of evaluation (ex-post), evaluation guidelines recommended by the European Commission, demand for the evaluation reliability and objectivity. In conducting the ex-post evaluation of the RDP the following methods were employed and combined: firstly, quantitative and qualitative analysis methods encompassing the analysis of different primary and secondary sources; secondly, the bottom-up approach, including surveys of the key stakeholders (MoA, NPA, key socio-economic partners, beneficiaries, excluded applicants); as well as different policy analysis methods (content analysis, comparative analysis, analysis of statistical data). Further this section of the report presents the main information collection and analysis methods in more detail (Sections and ). Intervention logic of measures. Data collection, analysis and conclusion formulation methods introduced further in this section of the report were used to answer common and national evaluation questions. The majority of common evaluation questions were aimed at assessing the programme effectiveness and impact at the overall programme level as well as at the level of different measures. The Lithuanian RDP lays down seven measures (including Technical Assistance ). All these measures were expediently aimed at solving agricultural and rural development issues specified in the analytical part of the RDP as well as meeting specific needs of different sectors. To solve these problems and satisfy the existing needs the RDP specified overall, specific and operational objectives. Different measures are provided with inputs (financial and administrative resources) which produce outputs during the project implementation and, thus, achieve specific operational objectives of measures. Finally, measure results turn into impact which has to meet overall objectives of the measure and, ideally, satisfy the needs identified at the beginning of the programme. Figure Relations between objectives and impacts in the programming cycle Source: Directorate-General for Agriculture and Rural Development. Guidelines for the Evaluation of the Support for Rural Development in the Programming Period of The analysis of interlinks among programme inputs, outputs, results and impact is called the intervention logic. This evaluation examines the intervention logic at the level of different measures. Its goal is to illustrate the main logic of each measure, the results and impact expected and to determine to what extent this intervention has been justified during the programme implementation. It should be noted that traditional rural development intervention measures, e.g. investments into improving processing and marketing of agricultural products, etc., were included into the SPD As a result, cohesion of different programmes was ensured. 29

30 Intervention logic schemes of respective measures are provided at the beginning of the analysis of the implementation of different measures presented in Section 5 of the evaluation report. They were used in order to identify, whether the measure results and impact had been the same as estimated and present conclusions on the effectiveness of different measures. Typology of beneficiaries. According to the European Commission s guidelines and explanatory sheets of common evaluation questions, it is recommended to distinguish types of beneficiaries, which assist in structuring the information collected and analysing evaluation questions. Given the European Commission s recommendations, when analysing chapter-specific and cross-cutting evaluation questions, the data collected were analysed with reference to different types of beneficiaries by the following criteria: Table Typology of beneficiaries Criterion Types of beneficiaries Age of the beneficiary Up to 30 years old years old years old Older than 60 years old Farm size Up to 5 ha 5 10 ha ha ha ha ha More than 50 ha Agricultural sector Dairying Cattle breeding (livestock, pigs, poultry farming, etc.) Crop/pastures Fruit, berry production Forestry Combined Employment in agriculture/ farming Full-time job activity Part-time job Farming area Highly disadvantaged area Less disadvantaged area Areas with environmental restrictions (Natura 2000) Favoured area County 10 Lithuanian counties Source: TNS Gallup. Report of the Survey of Beneficiaries supported under measures of the RDP By cross-cutting evaluation questions, answers were also analysed by measures under which the beneficiary had been supported. With reference to the typology of beneficiaries analysis sections of results of the beneficiaries survey were also determined. When analysing evaluation questions, not all indicators were divided by the said types of beneficiaries. They were taken into account in cases where significant differences or deviations of indicators were noticed compared to individual groups of beneficiaries. 30

31 Types of the support impact. The ex-post evaluation was aimed at discussing general changes observed in the course of the RDP implementation and assessing the RDP contribution to the promotion of these changes. Methodologically these changes are described as gross effect and net effect. In addition, a deadweight effect, i.e. a change experienced by a direct beneficiary after the support and which would have emerged even without this financing, was also analysed. The deadweight effect weakens the impact of the programme implementation and effects the extent of achievement of objectives. Another important aspect of the programme implementation is the indirect impact which increases or reduces the utility of the programme implementation. The evaluation report also discusses a broader programme impact on the majority of the population (not only on beneficiaries). The following methodological tools were used to distinguish these different types of impact: Net effect is characterised by a clear connection between input (support) and a result/impact. To separate the net effect of support from the gross effect, it is important to analyse exogenous factors effecting beneficiaries, but not depending on the RDP implementation. To this end, the evaluation compares changes experienced by beneficiaries with a general situation in the country and changes emerged in the course of the RDP implementation, i.e. programme-level indicators are compared with context indicators. Another method applied to the assessment of the net effect is a beneficiaries survey where, among other things, beneficiaries were questioned to what extent the support received had contributed to certain changes (e.g. To what extent has the payment received/investment implemented contributed to the maintenance of/increase in income, etc. to a great extent, to a limited extent, to a small extent, not at all). Respective questions were asked during in-depth interviews as well (e.g. To what extent has the RDP implementation effected changes in agriculture and rural development (income, capacity building, strengthening of human resources, environmental protection, competitiveness, etc.) (to a great extent/to a small extent?) Deadweight shows effects, which would have arisen even if the intervention had not taken place. The deadweight effect is indicated when beneficiaries would have farmed to the same extent, would have been ensured income of the same level or would have made all investments even without the support. These questions were included into all questionnaires for beneficiaries under all measures and given to a comparison group the excluded applicants. (Examples of a question: Have you implemented the assisted actions retired from agricultural production, afforested the area, engaged into organic farming, etc. even without the support?). Indirect effect is a positive or negative support impact of a broader macroeconomic scope and on a greater share of the population (not only on direct beneficiaries). To conduct an impact evaluation, during in-depth interviews representatives of administrating institutions and socio-economic partners were asked, whether the RDP had had an indirect impact on rural development and what kind of impact it had been (positive/negative; strong/weak) Data collection methods Analysis of secondary sources At the beginning of the evaluation the evaluator collected and analysed legal acts, reports, monitoring tables, data collected on the basis of the NPA information system (Rural Development Programme Administration Information System - RDPAIS), data of the Department of Statistics and other statistical data (e.g. Eurostat) on the contextual situation, previous evaluations and studies, other relevant information related to the evaluation object. A content analysis was applied 31

32 to the analysis of documents and literature. Section 2.13 and the end of this evaluation report include a more detailed list of sources of information. It could be mentioned that during the evaluation one of the most significant secondary sources of information was relevant statistical data and indicators collected by the programme monitoring system. In-depth interviews Aim of in-depth interviews. In-depth interviews were conducted for the purpose of the evaluation. They helped to collect qualitative data and opinion about the RDP implementation, issues, and causal relations. The information accumulated with a help of in-depth interviews complements the data of secondary sources of information. Interviews. Interviews were made with representatives of the institutions involved into the RDP implementation (MoA, NPA, RDP Monitoring Committee). There were 9 respondents in total: 4 representatives of the MoA, 3 of the NPA, and 2 of socio-economic partners. A full list of interviewees is provided in Annex 3 of the report. To ensure a higher-level participation of stakeholders, the Contracting Authority informed the institutions concerned on the project under implementation and relevance of the participation in it. Nature of the method. In terms of their nature, the interviews were in-depth (average duration 1 hour), direct, semi-structured. A semi-structured interview provided more flexibility as the subject could be adjusted a little, new questions introduced given the interview scenario. As a result, different aspects of the RDP implementation could be examined with different interviewees, taking into account the institution/organisation they represent, experience in participating in the RDP implementation. Beneficiaries survey Aim and respondents of the survey. A representative survey of beneficiaries was carried out in order to collect primary data necessary for answering common and national evaluation questions. The survey aimed at collecting information from beneficiaries on the following aspects: the results achieved or investment made by the support funds, the compliance of measures with needs, the impact of measures on employment, environmental protection, income, labour efficiency, etc. Given the measures, different questionnaires were drawn up with the main three parts: (1) information on the characteristics of the beneficiary, (2) questions related to cross-cutting evaluation questions, (3) specific questions by a specific measure (the questionnaire was approved together with the Inception Evaluation Report). Beneficiaries were surveyed according to all RDP measures, except the measure of Technical Assistance. The survey sample was chosen taking into account a total number of applications and statistical error, which is important when assessing answers provided by respondents: according to calculations of statistical errors, a sample of 350 respondents was selected. Given a total number of authorised applications (356,926) and judging answers given by 350 respondents, the biggest statistical error was ± 5.2% with a reliability level of 95%. This extent of error is rather small, if generalising the totality of beneficiaries. It would have been inexpedient to increase the sample as the increase in a number of respondents diminishes the error only a little bit (e.g. if a sample of 400 respondents is selected, the error would be ± 4.9%). A total number of respondents were divided by different RDP measures in order to have as high representation of survey results as possible. When dividing the total sample in proportion with a factual number of applications under each measure, samples of some measures have only a few respondents (e.g. only 1 respondent would have been surveyed in the measure Afforestation of Agricultural Land ). In such case, samples of some measures become invisible for statistics and no deeper analysis by measures would be impossible. 32

33 Given these limitations and taking into account the common practice in sociological researches, samples of all measures were artificially increased at the expense of the most popular measure ( Less Favoured Areas and Areas with Environmental Restrictions ). Once the survey was carried out it appeared that a little bit more beneficiaries were surveyed instead of 350 respondents 379 were surveyed by maintaining general proportions of distribution. The distribution of samples is illustrated below. Table Distribution of respondents by measures RDP measure Number of authorised applications Factual distribution of samples by proportions Revised quotes A number of factually surveyed respondents Early Retirement 20, Less Favoured Areas and Areas with Environmental Restrictions 324, Agri-Environment 3, Afforestation of Agricultural Land 1, Support for Semi- Subsistence Farms Undergoing Restructuring 2, Meeting Standards 5, TOTAL 356, Source: Data provided by the NPA (30 June 2008); TNS Gallup. Report of the Survey of Beneficiaries supported under measures of the RDP Survey method. A telephone survey was carried out by a market and sociological research company TNS Gallup by using CATI method (Computer Assisted Telephone Interview). The data were analysed by SPSS/PPC software. The survey results are provided in a separate report (a report on the survey results is provided in Annex 2 of the final evaluation report). The survey results were analysed by the following sections: the RDP measure, counties, age of beneficiaries, farm size, agricultural sector, employment in agriculture, area (LFA, Natura 2000, advantaged). The survey data are integrated into the evaluation report by illustrating answers to the evaluation questions. Survey of excluded applicants Aim and respondents of the survey. A survey of a comparison group excluded applicants was conducted to assess the gross effect and the deadweight effect of the RDP support. Questionnaires were also prepared for this survey with reference to the measure under which the applicant had applied for support (the questionnaire was approved together with the Inception Evaluation Report). Given a total number of the unauthorised applications (9,736 in total), it was decided to survey 50 excluded applicants. 60 respondents were surveyed, 52 of which are still engaged in the agricultural activity. Survey method. The same method was used to conduct this survey as in case of the beneficiaries survey. 33

34 Data analysis methods and formulation of conclusions Content analysis The content analysis was applied to the analysis of all non-quantitative, immeasurable evaluation questions. This method is very important for the evaluation as it helps to analyse the data necessary for the evaluation surveys, interviews, implementation reports, programme documents, other sources. Analysis of statistical data This method was used for the analysis of monitoring system data (monitoring tables, date from RDPAIS), contextual statistical data, and survey results. When analysing findings of the survey results, the distribution of answers was graphically illustrated. It is worth mentioning that distributions of answers presented in figures are rounded up to whole numbers (per cents), therefore, in some cases a total number of respondents (totality) amounts to more or less than 100%. Counterfactual analysis The counterfactual analysis was used for comparing subjects who were exposed to an intervention with a comparison group who were not exposed (assessment of deadweight effect) and for examining situation before and after RDP implementation (assessment of net effects of intervention) Sources of information Data of primary and secondary sources were used to answer the common and national evaluation questions. The main types of sources of information used are outlined below, meanwhile a thorough list of references is provided at the end of the report. Primary sources: interviews, surveys, expert opinions. Secondary sources: The RDP monitoring data: monitoring tables and data of the NPA information system (Rural Development Programme Administration Information System RDPAIS) on indicators of the programme implementation (physical and financial); Relevant data of the Department of Statistics, data and structural studies of the census of agriculture in Lithuania, data of the Register of Households and the Farmers Farm Register, Eurostat, etc.; Relevant EU and Lithuanian legislation; Evaluations conducted (ex-ante evaluation of the RDP, ex-ante and interim evaluation of national RDPs of other countries, evaluation of other EU support funds); European Commission s methodological guidelines for evaluation; Socio-economic researches, studies; Related theoretical and empirical literature. 34

35 2.2. Issues and Limitations Related to the Evaluation Methodology During the ex-post evaluation of the RDP the evaluators faced some methodological limitations related to the availability of the data necessary for the evaluation, which conditioned the quality and specificity of the further analysis, evaluation and conclusions. First of all, when analysing the RDP context and changes the evaluators confronted the issue of the determination of context indicators. Taking into consideration a description of the baseline situation provided in the RDP, it was difficult to identify which year indicators should have been considered to be a starting point as different indicators were provided taking into account different time frames, i.e. initial data of different years were presented (covering the period of ). Meanwhile report on the RDP implementation examines changes appeared in The determination of the baseline situation indicators was essential for the evaluation as they helped to calculate changes in indicators and analyse the impact of the RDP implementation on the overall situation in Lithuanian rural areas. For the purpose of the evaluation the year of 2003 were considered to be the year of the baseline situation taking into account that the RDP implementation had not been started at that time, meaning that direct payments had not been made as well. Moreover, Lithuania has a rather complex system of agricultural statistical data collection: a census of agriculture was conducted in 2003, the results of which include the data on farms producing agricultural products (farms of registered farmers, family holdings and agricultural enterprises) and which are updated every second year by conducting agricultural structure surveys; moreover, a Register of Agricultural Holdings has been existing since 2003, where agricultural entities must register in order to receive EU or public support for agriculture and rural development. The evaluators faced some difficulties since the data accumulated in these sources did not coincide and in cases of different RDP measures relevant data of different sources were required taking into account their target groups and eligible applicants. Another limitation was the availability of programme-level data. The inception report identified a risk of insufficient explicitness and availability of monitoring data, which emerged in the course of the evaluation. To answer common and national evaluation questions, data collected on the basis of the monitoring system monitoring tables and RDPAIS data collected by the NPA were firstly referred to. When analysing, the data collected in monitoring tables were insufficient to answer evaluation questions, meanwhile when trying to get the data accumulated by the RDPAIS the evaluators faced technical limitations it was difficult for employees of the NPA to select and present data by certain sections; moreover, data collection was very time-consuming 12. In case of a shortage of necessary monitoring data (e.g. the indicator of a number of maintained or created jobs), data of the primary sources of information were used results of surveys and interviews. In case of no integrated data on beneficiaries and in order to ensure the reliability of the evaluation and conclusions formulated, the analysis of the evaluation questions attempted to use several sources of information, i.e. to compare results received by surveys with available statistical data, information provided in other researches. During the analysis of programme-level indicators the evaluators faced a frequent issue of changes in data. Considering a big number of applications (more than 366 thousand), the situation was constantly changing and the analysis data were frequently revised 13. Given it, the report indicates a specific date of the data provided when analysing specific it, e.g. absorption of financial funds. 12 During interviews respondents also mentioned the issue of the RDPAIS use. A more detailed discussion of the data collection system is presented in the section of the RDP administration system evaluation. 13 The situation may change because of a number of reasons penalties applied to beneficiaries, death of beneficiaries, etc. 35

36 Another common limitation the determination of the impact ascribed specifically to the RDP implementation, i.e. the assessment of the net effect of the RPD. The assessment of the RDP impact had to take into consideration the impact of direct payments on agriculture as in the period of they provided a great support (EUR million). This support had also a significant impact on the implementation of one of the tasks of the RDP compensatory measures income maintenance and improvement. In attempt to identify the net effect of support under the RDP, results of the survey of the comparison group were used and statistical data on the overall situation in Lithuanian rural areas analysed. Another limitation was met here in terms of lack of context data as common evaluation questions examine very specific and practical criteria and indicators which are not always available at Lithuanian level. As a result, the assessment of the net effect of support was usually based on a qualitative assessment, which helped to identify additional exogenous factors effecting beneficiaries (e.g. direct payments, general market changes, tendencies of the increase in prices of agricultural products, etc.). Other less significant obstacles and limitations relevant for a specific evaluation question are mentioned further in the report. 36

37 3. CONTEXT OF THE RDP IMPLEMENTATION AND SOCIO-ECONOMIC DEVELOPMENT NEEDS This section of the evaluation report presents socio-economic and environmental situation in Lithuanian rural areas during the baseline period, i.e. before the start of the RDP implementation, analyses changes in baseline indicators in the course of the RDP implementation ( ), identifies exogenous factors (general socioeconomic changes) effecting the RDP implementation and briefly discusses the relevance of the RDP objectives and tasks Socio-Economic and Environmental Changes To what extent has the socio-economic and environmental situation changed in (changes in baseline context indicators of the RDP)? Socio-economic changes occurred in in Lithuanian rural areas. The RDP was being implemented in the course of socio-economic changes in the country and rural areas, which were conditioned by Lithuania s accession to the EU. Rural areas remained important for the socio-economic development of the country. In 2007 rural areas covered the area of 63.6 thousand sq. m. which was 97.4% of the total area of Lithuania. At the beginning of ,115.6 thousand people lived in Lithuanian rural areas, i.e. almost 30 thousand less than at the beginning of It amounted to 33.1% of the country s total population. In population of rural areas was constantly decreasing as well as their density and share in a number of the country s total population (Table 3.1.1). The density of the rural population remained higher in the municipalities with more favourable conditions for agricultural development and areas nearer big towns and cities. Table Rural areas in Lithuania area and population /2003 (+,- %) Total in Lithuania Population, thou. 3, , , , , Population density, people/sq. km In rural areas Population, thou 1, , , , , Their share in total population, % Population density, people/sq. km Source: Database of the Department of Statistics of Lithuania Rural depopulation was conditioned by a negative rural population increase/decrease and negative net migration since 2005 (Table 3.1.2). Table Natural increase/decrease and migration of the rural population /2003 (+,- %) Natural population increase, thou. -6,450-6,835-8,105-8,045-8,

38 Natural population increase per 1000 population Net migration of the population, thou. 5,796 2,304-1,375-1, Net migration per 1000 population Sources: 1) Database of the Department of Statistics of Lithuania 2) Demografijos metraštis 2003 (Publication: Yearbook of Demographics 2003). Department of Statistics. Vilnius, In the period the internal migration in rural areas was positive (the number of inhabitants who moved in rural areas was by 1.8 thousand bigger than the number of inhabitants who moved out), however, the number of people who emigrated to foreign countries has significantly increased since the first days of Lithuania s membership in the EU (by 75% in 2007 in comparison with 2003). The working-age population with children comprised the greatest share among the population who left rural areas. It contributed to unfavourable tendencies in the structure of the rural population (Table 3.1.3). In 2007 the share of rural inhabitants older than 64 years old (18.2%) was bigger than in urban areas (14.6%) and smaller in groups of the working-age population (65% and 70.7%, respectively). In the number of the population under 15 years old noticeably reduced in rural areas by more than 16%. Demographical changes in the rural population in were not beneficial for further rural development and integrated implementation of rural development policy measures. Table Population by age 1 January January /2004 (+,-%) Urban areas Rural areas Urban areas Rural areas Urban areas Rural areas Total, thou. 2, , , , Population under 15 years old Population of years old 1, , Population over 64 years old Structure, % Population under 15 years old Population of years old Population over 64 years old Sources: 1) Database of the Department of Statistics of Lithuania 2) Demografijos metraštis 2003 (Publication: Yearbook of Demographics 2003). Department of Statistics. Vilnius, The educational attainment of the rural population remained lower than of the urban population in the period under consideration (Table 3.1.4). Educational indicators of the rural population improved during this period: the number of people with a higher professional qualification increased (the number of people with higher and higher vocational education increased by 23%, meanwhile the number of people with secondary education with professional qualification by 18%); and vice versa the number of the population with lower professional education or without education at all notably reduced, i.e. by 11%. These changes in the education attainment of the rural population in had a positive impact on further rural development and implementation of objectives of the Rural Development Plan Nevertheless, the gap between the educational attainment of the population in urban and rural areas expanded more. In 2007 the number of inhabitants with higher or higher vocational education per inhabitants was bigger in towns and cities than in rural areas by 2.7 times. In 2003 this difference was a little bit smaller (2.6 times). 38

39 On the other hand, the structure of the employed rural population by educational attainment positively changed in the course of this period. The share of inhabitants with higher or higher vocational education increased from 13.6% in 2003 to 17.9% in The share of the employed in urban areas increased more from 33.1% to 38.8%, respectively. Table Educational attainment of the population a number of the educated per 1000 inhabitants 2007/2003 ( %) Rural areas Urban areas Rural areas Urban areas Rural areas Urban areas Higher, higher vocational education Secondary education with professional qualification Basic education, primary education with professional qualification Specialised-secondary, postsecondary education Primary education Source: Database of the Department of Statistics of Lithuania Even though the employment rate in rural areas hardly changed in % in average - the unemployment rate dropped down significantly (by approx. 54%) (Table 3.1.5). Approximately thousand Lithuanian rural inhabitants were employed in 2007, i.e. only by 1% or 3.8 thousand more than in Given the number of the registered unemployed, the country s average unemployment rate decreased by 8.1% during this period, i.e. from 12.4% in 2003 to 4.3% in The reduction of the unemployment rate in rural areas was more modest by 5.2% or from 9.6% to 4.4%, meanwhile the unemployment rate in towns and cities decreased by even 9.4%. In the number of the unemployed in rural areas fell down from 46.5 thousand to 20.5 thousand or by almost 56%. The reduction in the unemployment rate in rural areas as well as in the whole country was greatly conditioned by the migration of working-age population to other countries. The biggest unemployment rate of the young rural population prevailing in the pre-programming period, compared to other age groups, remained in the RDP implementation period. On the other hand, the unemployment rate of aged population experienced the greatest reduction in comparison with other age groups, i.e. from 17.9% in 2003 to 6.7% in 2007 and was lower than in urban areas (9%). Table Employment and unemployment rates in rural and urban areas /2003 (+,-) In rural areas Employment rate Unemployment rate In urban areas Employment rate Unemployment rate Source: Database of the Department of Statistics of Lithuania In the employment structure by economic activities significantly changed in rural areas (Table 3.1.6): the share of the employed in agriculture, including hunting, forestry, fishery, shrank 39

40 by more than 19.1%, meanwhile the share of the employed in services and constructions went up by 11.2% and 5.8%, respectively. Changes in the employment of the rural population in different economic activities were not equal. In 2007 the number of rural inhabitants engaged in agriculture, hunting and forestry decreased by almost 37% in comparison with 2003, while a share of the rural population working in the service sector, contrarily, significantly increased by 37.3% and in the construction sector by more than 2.5 times. It should be noted that since 2006 the lack of labour force has grown in agriculture and related activities a number of available jobs increased by more than 5 times (from 72 in 2005 to 374 in 2007). Such a situation was conditioned by several factors. As it has been mentioned, a flow of working-age emigrants has notably increased since In , when earnings significantly increased in the construction sector, a few agricultural employees went to work there. In , when the employment rate in agriculture was relatively rapidly going down, a number of small and medium-sized enterprises (SMEs) substantially increased in rural areas. SMEs engaged in constructions were especially active in this period a number of them doubled. A number of rural tourism farmsteads also increased in 2007, i.e. by 1.6 times in comparison with Table Employment of rural population in areas of economic activity /2003 Thou. % Thou. % % (+,- points) Employed rural population in total Agriculture, hunting, forestry and fishery Industry Construction Services Source: Database of the Department of Statistics of Lithuania The standard of living in rural areas improved more than in urban areas because of a notable increase in net disposable household income of the rural population, especially farmers, and a reduced gap between it and net disposable household income in urban areas (Table 3.1.7). In this period the average net disposable income in rural households grown by 70% and of farmers by almost 2.6 times in comparison with the growth of 62.9% experienced by urban households. A gap between average disposable household income in rural and urban areas shrank from 30% in 2003 to 20% in 2006 (26% in 2007). Disposable household income of farmers in 2006 and 2007 exceeded the same income of the urban population by 1% and almost 3%, respectively. Sources of the farmers household income significantly changed in the course of the period under consideration. A share of income from the individual activity mostly developed in agriculture increased by more than one fifth, i.e. from 59.3% in 2003 to 79.9% in The greatest share of this income consisted of income from agriculture. A share of social allowances reduced by more than 15% from 26% to 10.7%. The improvement in the standard of living in rural areas is proved by a reduction in a share of food expenditure in the average household consumption expenditure in the course of the period under consideration. It reduced by 10% in rural households and by 11% in farmers households compared to the reduction of 4.8% in urban households. Table Average disposable household income and their growth

41 On average in the country One household per month, LTL Increase in net income, 2003 = In rural areas One household per month, LTL Increase in net income*, 2003 = In urban areas One household per month, LTL Increase in net income*, 2003 = Farmers One household per month, LTL Increase in net income*, 2003 = * calculated by the evaluators on the basis of the official data of the Lithuanian Department of Statistics on nominal household income and average annual consumer (consumer goods and services) price indices. Source: Database of the Department of Statistics of Lithuania A rapid growth of income of the rural population and farmers was determined by changes in conditions of the agricultural activity, which emerged due to Lithuania s accession to the EU: significantly bigger direct support for farms, farm consolidation and modernisation, increased earnings, rise in prices of agricultural products and greater demand for agricultural products as a result of the trade liberalisation with other EU Member States, etc. Changes that appeared in in the employment and household income rates in Lithuanian rural areas show the following positive social improvements: 1) notable decrease in the employment in agriculture and increase in other activities, especially service sector; 2) significant reduction in the unemployment of the rural population, especially of the rural youth; 3) improvements in the standard of living due to a high increase in disposable rural household income, a gap between urban household income and rural household income became smaller; it also reduced a share of food expenditure. The Improvement of possibilities to develop education and build capacities of the rural population to act in the environment of the open market was important for a successful implementation of the RDP objectives. Lithuania has a consistently distributed network of educational institutions. Moreover, the involvement of rural inhabitants in the lifelong learning process increased in the first years of the RDP implementation ( ). It was mostly affected by the EU support for teaching, requalifaying, capacity building (provided under a measure of the Single Programming Document). In fulfilment of these support programmes a number of training courses were organised for farms, employees, inhabitants, local activity groups, communities. They provided the rural population with a possibility to raise their qualification and improve entrepreneurship. Nevertheless, in 2006, at the end of the programming period, a number of the learning people began to drop as some of them thought that after one training course they had gained enough knowledge and had no need for further learning. In 2007 the share of aged learning population made 2.6% in Lithuanian villages (2.9% in 2004, 3.2% 2005, 2.4% 2006). This rate is very low in comparison with Lithuanian urban areas (6 % in 2006) and other EU Member States (even in 2004 the average of EU-25 was 9.0%). The Lithuanian Agricultural Consulting Service played an important role in consulting and training rural inhabitants in The main users of its services were farmers, agriculture experts, members of agricultural cooperatives, representatives of small and medium-sized enterprises in rural areas, teachers of agriculture schools. 44 consulting services operated in each region (each municipality) according to needs of service users in the period under consideration. Each service employed 3-6 specialists who provided qualified services and consultancies on different issues 41

42 related to crop production, livestock farming, household economics and accountancy, construction of agricultural buildings, mechanisation, etc. Consultants also organised training, seminars, assisted farmers in implementing individual investment projects and joint projects with Lithuanian and foreign partners. A successful implementation of the RDP objectives was also influenced by the experience of farmers and other rural population gained in implementing measures of the SAPARD programme in Good practice examples of using the SAPARD support encouraged farmers and other rural inhabitants to have an active interest and apply for the EU support in the implementation of the RDP measures. The EU support also promoted the social involvement of the rural population who started to solve local problems by joining communities. In 2007 Lithuania had 1.3 thousand registered rural communities, about 1.1 thousand of which were actively operating. A number of communities increased by 3 times compared to In addition, the EU support encouraged a rapid process of the establishment of local activity groups. In 2003 there was 1 local activity group, in and in 2007 even 45. An association The Network of Local Activity Groups unifying local activity groups was set up in All this proves that general socio-economic changes in rural areas, except demographic, had a positive impact on the implementation of the RDP objectives and tasks. Changes in Lithuanian agriculture and food sector in In the country s gross domestic product (hereinafter the GDP) undergone a rapid growth 7.9% per year on average. Such economic growth was one of the preconditions of a successful implementation of the RDP objectives. Lithuanian agriculture and food sector were characterised by a much slower change in a percentage share of the gross added value (hereinafter the GAV) in the period under consideration compared to the previous ones. In the share of the gross added value created by agriculture and food sector in the country s GAV was 8.2% on average. The share of agriculture and related activities reduced by 0.5% in 2007 compared with 2003, i.e. from 4.9% to 4.4%, and the share of the food sector by 0.2%, i.e. from 3.9% to 3.7% (Table 3.1.8). It is worth noticing that in previous periods a share of both agriculture and food sector in the GAV averagely shrank much more per year. The volume of the gross added value was rapidly increasing in the food sector in (by 10.3% on average), which remained the main user of agricultural products in Lithuania during this period. The economic growth in agriculture and related activities was relatively slow in 2007 the GAV increased only by 3% in comparison with 2003, meanwhile in 2004 and 2006 it even reduced as a result of unfavourable natural conditions for agricultural production (Table 3.1.8). Table Indicators of the gross added value of agriculture and food sector At current prices, million LTL GAV in agriculture, hunting and forestry 2, , , , ,873.1 GAV in the food sector 1, , , , ,225.0 Cumulative growth, 2003 = 100% The country s GAV GAV in agriculture, hunting and forestry GAV in the food sector A share in the country s GAV 42

43 GAV in agriculture, hunting and forestry GAV in the food sector Source: calculated by the evaluators with reference to the database of the Department of Statistics of Lithuania The increase in material and direct foreign investments had also a positive effect on the agricultural development and competitiveness building. Even though a share of agriculture and related activities in the total volume of direct foreign investments shrank from 0.8% in 2004 to 0.6% in 2007, their value rose by more than 1.5 times, i.e. from LTL million in 2004 to LTL million in Investments into agriculture provided a possibility to improve farm structure, increase its efficiency and strengthen competitiveness. The compliance with hygiene and environmental standards conditioned the improvement in the quality of agricultural products and safety guarantee. In labour efficiency increased by 2.2 times (Table 3.1.9). One of the key factors conditioning a relatively fast growth of labour efficiency was a rapidly shrinking number of the employed in agriculture. In 2007 agriculture, hunting and forestry employed 96.3 thousand (37.9%) less employees than in 2003 (Table ). Such reduction was determined by the abovementioned natural demographic changes, relatively high emigration level, the decreased number of farms, the agricultural activity terminated by farmers, who had used the RDP support to retire early from agricultural production, other reasons. Table Cumulative growth of labour efficiency and its components in agriculture* (2003=100) Gross added value (at base price)** Labour force calculated by annual work unit (AWU) Labour efficiency * A change in the gross added value (nominal) was calculated in the agricultural industry according to the data of Lithuanian economic accounts for agriculture. ** nominal value Source: calculated by the evaluators with reference to statistic data provided by Eurostat EAA data The share of the employed in the agricultural industry in a total number of the employed in the country was constantly dropping down (from 17.7% in 2003 to 10.3% in 2007). Meanwhile the employment rate in the food sector, where agriculture is the main producer of raw material, increased by 11% and its share hardly changed (Table ). The development of the agricultural industry was one of the key preconditions for the job maintenance and creation in the processing industry of food and non-food agricultural raw material. Table Employment of the population in agriculture, hunting, forestry and fishery Thou. Total number of the employed population 1,438 1, , ,499 1,534.2 In agriculture, hunting, forestry and fishery In the production of foodstuffs, drinks and tobacco % Total number of the employed population In agriculture, hunting, forestry and fishery

44 In the production of foodstuffs, drinks and tobacco Change, 2003=100 Total number of the employed population In agriculture, hunting, forestry and fishery In the production of foodstuffs, drinks and tobacco Source: Database of the Department of Statistics of Lithuania The development of agriculture and food sector in was promoted by the increased sales of foodstuffs in local and foreign markets as well as strengthened international competitiveness. In 2007 the export of agricultural products and foodstuffs expanded by 3.1 times in comparison with It should be noted that the export of agricultural, hunting, forestry, fishery and related service products grew much more than the export of ready-made foodstuffs and drinks during the period under consideration (Table ). The balance of foreign trade of agricultural products and foodstuffs, which had been negative for the whole decade, became positive in 2004, meanwhile the decreasing share of these products in the country s foreign trade turnover started increasing (Table ). There was a significant increase (up to 17%) in the share of the export of agricultural products and foodstuffs (according to KN group of products). Even though the export of ready-made foodstuffs and drinks prevailed in the course of the whole period under consideration, the export of agricultural, forestry and other related service products also notably increased. Such changes in foreign trade increased the attractiveness of agriculture and related activity business and had a positive impact on the implementation of objectives and tasks of the RDP Table Indicators of foreign trade in products of agriculture, related activities and foodstuffs /2003 KN( 01-24) Agricultural products and foodstuffs, million LTL Export 2, , , , , Import 2, , , , , Balance ,280.7 Share in % Export Import CPA(01-02,05) Agricultural, hunting products, fish, fishery and related service products, million LTL Export , , , Import , , Balance ,056.2 Share in % Export Import CPA(15) Foodstuffs and drinks, million LTL Export 1, , , , , Import 1, , , , , Balance Share in % Export

45 Import Source: Database of the Department of Statistics of Lithuania Changes in macroeconomic indicators of agriculture and food sector in show that the input of these sectors to the state and rural economy remained important and was one of the presumptions for a successful implementation of the RDP objectives. The lands used for agricultural production were expanded during the period under consideration (Table ). According to the data of the 2003 census of agriculture and research on the farm structures conducted in 2007, farms increased the utilised agricultural area by 12%. It was conditioned by the process of the land return to private owners, which was coming to the end, and farmers optimistic attitude to perspectives of the agricultural business development. Such attitude was formed by changes in economic conditions for agricultural economic business conditioned by Lithuania s accession to the EU. By the end of 2007 the rights of ownership to the land in rural areas were restored for 97% of the applicants. When the EU direct payments were started to be paid to agricultural producers and investments for the modernisation of agricultural holdings and settlement of young farmers given in 2004, the agricultural land market, which had been developing very slowly at that time, became much more active. Moreover, a demand for agricultural land was also increased by active investors aimed mostly at income from the land lease or its resale. Due to these processes, the area of private and leased land used in farms increased in by 15.3% and 9.7%, respectively (Table ). Most of the land, i.e. approximately 70%, was leased from private entities. Most of the state-owned land was leased by natural entities and personal farms; much of the area is still not utilised at all. At the beginning of 2008 this land amounted to 40% of the state-managed land. Table Utilised agricultural land by type of ownership in all farms thou. ha % thou. ha % thou. ha % Total 2, , , Private land 1, , , Leased land 1, , , Other Sources: 1) Provisional Results of the Census of Agriculture Department of Statistics. Vilnius, ) Results of the Farm Structure Survey Department of Statistics. Vilnius, A more active agricultural land market, noticeably increased volumes of investments into the farm modernisation as well as direct payments had a positive impact on changes in the structure of Lithuanian agriculture. In the share of small farms reduced, meanwhile the share of large farms increased (Table ). However, the farm consolidation process was still slow likewise in previous periods. Even though an average farm size increased by almost 19% in 2007 compared to 2003, i.e. from 10.6 ha to 12.6 ha, it remained small. Farms of less than 20-ha were still prevailing in 2007, amounting to 91.3% of all farms (in 2003 they made 93.6%). A share of farms of more than 100 ha grew from 0.7% to 1.3%. Likewise in previous periods, a slow farm consolidation process in the period under consideration remained the main weakness of the objective of the Rural Development Plan to strengthen international competitiveness of Lithuanian agriculture. Table Agricultural structure in Lithuania (%) Land area, ha Number of farms Land area Number of farms Land area Number of farms Land area 45

46 < < < < < < and > Total Sources: 1) Provisional Results of the Census of Agriculture Department of Statistics. Vilnius, ) Results of the Farm Structure Survey Department of Statistics. Vilnius, During the first four years of the implementation of the RDP the share of young farmers and farmers under 40 years old became larger by almost 4%, i.e. it increased from 13.4% at the beginning of 2004 to 17.3% at the beginning of The share of pre-retirement aged farmers fell down by 1.4%, meanwhile the share of farmers of 60 years old and more decreased by 4.3% (Table ). A comparatively slow process of farmers age turnover is ascribed to the weak side of the implementation of the said RDP objective. Table Distribution of farmers by age Age groups <= >= Total Source: calculated by the evaluators on the basis of the data of the Farmers Farm Register. In the course of agricultural production was being intensified by using more chemical substances, e.g. the use of pesticides increased by 28% per hectare of the utilised agricultural area (Table ). It increased a risk of the environmental pollution; however, compared to the EU Member States with intensive agriculture, it is a small amount of detrimental fertilisers, pesticides and other chemical substances in use. On the other hand, it was counterbalanced by expanding areas of certified organic farms and protected territories. Organic farming had become popular in Lithuania not only due to users interest in foodstuff safety, but also due to concerns for the environment, a possibility to harmonise farming with the environmental protection. Even before the implementation of the RDP , prerequisites necessary for organic farming formed in Lithuania: a favourable organic situation conditioned by organic farming, which was prolonged in the post-reform period; national and international acknowledgement of a certification enterprise Ekoagros; national direct support for organic farmers; constantly growing demand for organic products in local and international markets. The first organic farms in Lithuania were certified in 1993; meanwhile in 2003 the area of almost 23.3 thousand ha was certified in seven hundred organic farms. The application of the EU support measures to organic farming has been promoting the development of this type of agricultural production since Within four recent years a number of certified farms and certified area increased by more than 5 times (Table ). 2,855 farms were certified in 2007 (13 of which were fishery farms) and the certified area amounted to thousand ha. 46

47 Table Indicators of sustainable development Area of organic farms, thou. ha in comparison with the total area of the utilised land, % Afforested area, thou. ha 2, , , , ,135.8 in comparison with the total country area, % Area pf protected natural territories, thou. ha in comparison with the total country area, % Pesticides used, kg/ha for agricultural land Source: Indicators of sustainable use. Department of Statistics. Vilnius, Forest is one of the most important components in the formation and protection of natural environment and landscape in Lithuania (Table ). At the beginning of 2008 forests occupied almost 2,142 thousand ha, which is 3.6% or 98 thousand ha more than at the beginning of In the course of the period under consideration the forest area increased to 32.8% in Lithuania. Despite the increasing forest area, Lithuania is still behind other Baltic States. State-owned forest area makes 1,054.8 thousand ha in Lithuania (49.4%) thousand ha (34.9%) of the forest area belongs to private owners, thousand ha (15.7%) is the area, the ownership rights to which is still being restored or which is still being privatised. Typically private forestry in Lithuania has a number of small private forest areas. At the beginning of 2008 there were thousand legal owners of private forest areas, the average area of which amounted to 3.4 ha. In forestry remained one of the types of activity in rural areas, which contributed to the increase in the population employment and additional income as well as the preservation of the environment. In addition to wood, the main commercial forest products were mushroom, berries and fruit, herbals, game, Christmas trees, etc. However, the purchase of these products, excluding berries, has decreased in the recent period, e.g. the purchase of herbals fell down by even 62%, of mushroom by 8%. The purchase of berries grew by 8%. The environmental importance of forests became more significant in the period under consideration. Lithuania can be characterised by a wide biodiversity with thousand species. There are as many as 15,000 species of insects in Lithuania, over 7,000 species of fungi. Out of this variety over 200 species of flora, 200 species of fauna and nearly 100 types of mushrooms are rare and are approaching extinction, therefore, they are included into the Lithuanian Red Data Book. The network of protected areas in Lithuania (natural parks, sanctuaries, etc.), which aim at conserving or restoring natural and cultural heritage features, landscape ecological balance, biodiversity, gene pool for restoration of biota resources, has been gradually developing. In the area of protected territories increased by 27%, i.e. from thousand ha to 998 thousand ha, and the share of the area covered by them from 12.1% to 15.3% of the total country area. It could be concluded that positive changes in the indicators of sustainable development occurred in the period of : bigger area of organic farms and protected natural territories, greater environmental importance of forests. To what extent have socio-economic changes effected the RDP implementation? Social, economic and environmental changes in the state and rural areas, which occurred in , had a positive impact on the implementation of objectives of the RDP The main RDP objective competitive agriculture, possibilities to diverse activity, environmental protection was achieved during the period under consideration as, according to a detailed analysis of the macroeconomic situation, most indicators planned were positively changing. 47

48 The following socio-economic changes had a favourable impact on the implementation of the RDP : rapid economic growth in the country; increase in material and direct foreign investments in agriculture, related activities and food sector; rapid labour efficiency growth in agriculture; several times bigger scope of investments into the farm modernisation and direct support; increased sales of agricultural products and foodstuffs in local and foreign markets, enhanced international competitiveness; experience of farmers and other rural population gained in the implementation of the SAPARD programme measures; rapid growth of the rural population and farmers household income; increased employment and reduced unemployment of the rural population; increased educational attainment of the rural population; expanded agricultural areas utilised for agricultural production; more active agricultural land market; remarkably increased area of certified organic farms; expanded protected natural areas; greater importance of the preservation of the natural environment and landscape in forests; positive trade balance. The following factors had an unfavourable impact on further rural development and implementation of objectives and tasks of the RDP : demographical changes in the rural population, especially such as constantly degrading natural decrease/increase of the population, emigration of the working-age population to foreign countries and negative net migration; the education attainment of the rural population, which was still lower than the urban population; relatively little involvement of the rural population in the lifelong learning process; slow farm consolidation process; growing risk of the environmental pollution arising from the increasing use of chemical substances for the agricultural production intensification. 48

49 3.2. Evaluation of the RDP Relevance Have the RDP objectives met the main needs of the socio-economic development of Lithuania? The RDP relevance, i.e. the compliance of its objectives with the key needs of Lithuanian economic and social development, was analysed in the course of the ex-ante evaluation of the RDP as it was still possible to improve the programming documents taking into consideration the findings of the evaluation. According to the ex-ante evaluation report, a description of the baseline situation was adequate in a broad sense; however, it lacked the conclusion and classification of the main rural development issues. Given this notice, the RDP distinguished the main issues of agriculture and rural development (see Table 3.2.1). The ex-ante evaluation stated that the SWOT carried out on the basis of a description of the baseline situation and the key issues was consistent and constituted one of the main revisions of the RDP in comparison with the SAPARD programme. The SWOT analysis was a relevant starting point when defining the rural development strategy. Ex-ante evaluators identified a clear relation between inconsistencies to be solved and strategies and priorities in the RDP. Specific RDP measures were foreseen for the solution of the inconsistencies, i.e. rural development issues, provided in the description and SWOT analysis. To justify the relevance of the measures selected, Table presents the RDP measures grouped by the main RDP issues to be solved. Table Interlink between the key rural development issues and RDP measures Issue RDP measure 1. Small average farm size Measure 1: Early Retirement Measure 5: Support for Semi-Subsistence Farms Undergoing Restructuring 2. Low income and lack of sources of income (overdependence on agriculture) 3. Lack of technology both in primary production and processing sector Measure 2: Less Favoured Areas and Areas with Environmental Restrictions Measure 4: Afforestation of Agricultural Land Measure 5: Support for Semi-Subsistence Farms Undergoing Restructuring Measure 6: Meeting Standards 4. Insufficient social infrastructure Measure 7: Technical Assistance 5. Insufficient physical infrastructure (SPD Measure: Adaptation and Development of Rural Areas) 6. Threats towards the environment and cultural Measure 2: Less Favoured Areas and Areas with heritage Environmental Restrictions Measure 3: Agri-Environment Measure 4: Afforestation of Agricultural Land Source: Ministry of Agriculture of the Republic of Lithuania. Lithuanian Rural Development Plan The initial RDP version included also the measure supporting producer groups. Given the proposals provided in the ex-ante evaluation to have a deeper examination of and present the absorptive capacity of relevant beneficiaries, administrative capacities and marginal utility of the measures selected in the RDP, it was decided not to implement additional measure proposed to the new Member States Assistance in Establishing Producer Groups. This conclusion was reached after thorough consultations with key economic and social partners, according to which, this measure, in comparison to the others foreseen and existing ones, was of a comparatively low priority and received little interest among the rural society, which resulted in a risk of having a very limited number of applicants. 49

50 The RDP measures targeted at solving the said issues were supposed to implement specific RDP level tasks: improving agricultural structures by attracting young people into farming (Measure 1); improving income for farmers in less favoured areas through the EU annual income support payments (Measure 2); improving the environment through the agri-environment programme (Measure 3); providing a further source of income and employment opportunities for farmers and rural population through a substantial sustainable managed afforestation programme, compatible with the protection of natural values (Measure 4); providing income support and alleviating cash flow constraints in the semi-subsistence farms producing both for their own consumption and for the market through a flat rate annual aid aiming at turning those farms into commercially viable units (Measure 5); assisting agricultural producers by covering the expenses they must incur to take their production and livestock farming facilities into compliance with applicable EU requirements (Measure 6); increasing the awareness of the rural population on the possibilities provided by the RDP and compulsory requirements and building the capacity to use the available funds and administer them (Measure 7). When evaluating the relevance of the RDP objectives and tasks, it is important to note that the RDP must be analysed in the context of the Common Rural Development Strategy, i.e. together with the measures stipulated in the SPD and SRSP. A joint set of measures of the three documents had to solve a joint set of the rural development issues identified. In the evaluation of the RDP relevance from the today s perspective, it should be taken into consideration that a four-year period is not long enough for significant socio-economic changes to occur. Moreover, during this period Lithuania experienced some favourable macroeconomic changes with a positive impact on the RDP implementation. On the other hand, certain alterations were noticed: after Lithuania s accession to the EU the increased assistance to the agricultural activity promoted the return to the agricultural activity and several objectives set during the programming (mostly related to the activity diversification) lost their relevance, which resulted in the reallocation of financial funds and a failure to achieve indicators of certain measures (for more see sections of the evaluation report related to the analysis of financial inputs and implementation of particular measures). 50

51 4. ANALYSIS OF FINANCIAL INPUTS OF THE RDP This section analyses financial inputs of the RDP actual spending in relation to forecast expenditure, financial changes and the financial effectiveness of the implementation of the RDP. The analysis of financial inputs of the RDP provides answers to the following four evaluation questions: To what extent the fund allocation foreseen at the beginning of the programming period conformed to the RDP objectives /needs of potential applicants? How has the fund allocation been changing in the course of the whole programming period? What reasons have conditioned reallocation? What was the financial effectiveness (actual spending in relation to forecast expenditure)? 4.1. Comparison of the Financial Input Plan and Fact The total budget of EUR million was planned to achieve the overall and specific objectives of the RDP, including the EU assistance of EUR million (80% of the public assistance). All forecasted funds were distributed during the programme implementation period, while 249,636 beneficiaries benefited from this assistance 14. The total annual dynamics of the submission of applications to the NPA were stable: 121,500 applications were received in 2004, more than 123,000 in 2005, and almost 122,000 in Applications were also accepted in 2007; however, only under two measures of the RDP, i.e. Afforestation of agricultural land (174 applications were submitted) and Technical assistance (4 applications were submitted). The total of 356,702 applications were authorised for assistance under the RDP; therefore, we can state that the wide distribution of assistance was ensured during the implementation of the RDP of Lithuania for The main reasons behind the exclusion of applications were as follow: ineligibility of an applicant, the death of beneficiaries (upon absence of a person taking over the farm), the refusal of beneficiaries to continue participation in the measure (in which case a request to deregister the application must be submitted and the paid aid must be refunded) 15. The analysis of the regional distribution of applications for assistance under the RDP (see Figure ) shows that Vilnius and Utena counties account for the largest number of applications (22% and 20% of the RDP assistance respectively). Such uneven distribution of assistance is related to the specific features of the implementation of the RDP measure Less favoured areas and areas with environmental restrictions. As many as 89% of all applications were received for compensatory allowances for farming in less favoured areas (LFAs), and almost 30% of the RDP funds were disbursed as such compensatory allowances. This assistance was distributed not for the entire territory of Lithuania but rather for the areas that were attributed to LFAs according to Order Nos. 3D-72 and 3D-287 of 2004 of the Minister of Agriculture 16. According to the above orders, out of 20 municipalities classified as LFAs, 7 are situated in Vilnius County and 4 in Utena County. Uneven distribution was also determined by county sizes, the soil productivity, the number of farms 14 The grand total number of beneficiaries (based on the data provided by the NPA on 30 November 2008) that may not comply with the actual number of beneficiaries, as some of the beneficiaries were applicants under several measures. 15 Interview with representatives of responsible authorities 16 Order Nos. 3D-72 and 3D-287 On Less Favoured Areas of 2004 of the Minister of Agriculture (Official Gazette, No , 2004; Official Gazette, No ). 51

52 and the average farm size in counties 17. The evaluation of the distribution of the assistance under other RDP measures shows an adequately even distribution of applications and allocated assistance among all counties of Lithuania. Fig Distribution of applications received by Lithuanian counties The applications received in by counties Vilnius County; 79039; 22% Utena County; 72935; 20% Alytus County; 35100; 10% Telsiai Caunty; 38520; 10% Kaunas County; 19977; 5% Klaipeda County; 28190; 8% Panevezys County; 33728; 9% Marijampole County; 8257; 2% Siauliai County; 18426; 5% Taurage County; 34067; 9% Source: Ministry of Agriculture of the Republic of Lithuania. Report on the Implementation of the Lithuanian Rural Development Plan in 2007, May The statistical data on the collection of applications provided in Table show that the measure Less favoured areas and areas with environmental restrictions was the most popular during the programming period. Under this measure, the total of applications (90% of all the applications of the RDP) was received. Applicants used assistance under the measures Agrienvironment and Meeting standards period more actively than expected during the programming. On the other hand, several times less applications than expected were received under measures, such as Afforestation of agricultural land, Early retirement and Support for semi-subsistence farms undergoing restructuring. The limited demand for these measures can be partially explained by the novelty of these measures in Lithuania, i.e. no payments were being disbursed in relation to such activities prior to the commencement of the RDP in On the other hand, there are specific reasons characteristic to each individual measure explaining why funds allocated for such measure were not utilised and why forecasted objectives were achieved only in part. Section 4.2 analyses these reasons by evaluating the financial effectiveness of the RDP; such analysis is also provided in other sections of the evaluation report discussing the course and the results of the implementation of specific measures of the RDP. Table Statistical data on applications submitted for assistance under the RDP* and funds absorption Funds allocated Measure under the RDP (after the fifth amendment), million EUR Applications submitted, units Applications authorised/ approved, units Payments, million EUR Extent of implementatio n (the share of allocated assistance that was paid), % 17 Ministry of Agriculture of the Republic of Lithuania. Report on the Implementation of the Lithuanian Rural Development Plan in 2007,, May 2008, p

53 Early retirement 90, ,189 99,95 Less favoured areas and areas with environmental 177, ,124 99,99 restrictions Agri-environment 94, ,647 99,99 Afforestation of agricultural land 6, ,964 99,98 Support for semi-subsistence farms undergoing 7, ,689 99,96 restructuring Meeting standards 107, ,043 99,75 Technical assistance 5, ,326 93,02 Total: 489, ,982 99,85 *The table does not provide any data on measures Complementary national direct payments and Other (SAPARD surplus), as the evaluation covers only the analysis of the implementation, results and impacts of 7 measures of the RDP, as was stated under Section 1.2 of the Report. Sources: Data provided by the NPA, 30 November How has the fund allocation been changing in the course of the whole programming period? What reasons have conditioned reallocation? Five financial amendments of the RDP were made during the implementation of the programme (discussed in more detail in Annex 4) 18, which shows the difficulty in predicting the activity of applicants under different RDP measures and the respective demand for funds for the implementation of these measures. Low activity of beneficiaries in measures, such as Afforestation of agricultural land, Early retirement or Support for semi-subsistence farms undergoing restructuring, encouraged competent authorities to reallocate financial resources among RDP measures by directing more RDP funds to the most popular measures. The statistical data provided in Table show that major reallocation was performed in respect of measures Meeting standards (complementary 6% of all resources of the RDP financial plan were allocated) and Early retirement (the funding of this measure was reduced by 7% of the total RDP financial plan). The funding of Agri-environment and Less favoured areas and areas with environmental restrictions was significantly increased (additional 5% of all funds of the RDP financial plan were allocated for each measure). Furthermore, the funding allocated for Afforestation of agricultural land was reduced as many as 4 times (even though in terms of the whole RDP this amendment was not as significant as compared to other measures: the funding was reduced only by 3% of the entire RDP financial plan). Table Adjustment of RDP financial inputs during the implementation. Priority/measure Original allocation of assistance, million EUR Allocation of assistance following the latest (fifth)* amendment of the RDP, million EUR 18 There were five financial amendments made: 6 February 2007, 6 December 2007, 25 February 2008, 17 June 2008 and 22 September

54 Of which EAGGF % allocated for each measure Of which EAGGF % allocated for each measure Total Total Priority A Environment and less favoured areas 279, ,419 46% 379, ,277 62% Agri-environment 62,2 49,76 10% 94,652 75,721 15% Less favoured areas and areas with environmental restrictions 146,9 117,52 24% 177, ,710 29% Meeting standards 70,174 56,139 11% 107,309 85,847 18% Priority B Alternative use of agricultural land 26,792 21,434 4% 6,965 5,572 1% Afforestation of agricultural land 26,792 21,434 4% 6,965 5,572 1% Priority C Farm restructuring 160, ,14 26% 97,922 78,338 16% Early retirement 129, ,74 21% 90,232 72,185 15% Support for semisubsistence farms undergoing restructuring 30,5 24,4 5% 7,692 6,153 1% Other actions 145, ,507 24% 128, ,308 21% Technical assistance 5,921 4,737 1% 5,726 4,58 1% Complementary national direct payments 120,45 96,36 20% 119,411 95,528 19% Other (SAPARD surplus) 19,263 15,41 3% 2,75 2,2 1% TOTAL 611, ,5 100% 611, ,5 100% *The latest financial amendment was performed during the evaluation, i.e. on 22 September Sources: Ministry of Agriculture of the Republic of Lithuania. Lithuanian Rural Development Plan ; Communications on financial amendments to rural development programming documents provided by Lithuania to the European Commission. Even though the reallocation of support helped ensuring absorption of the funds, still, fairly low financial interventions aimed at resolution of certain agricultural problems reduced the expected extent of the RDP impact on the promotion of alternative income resources in rural areas and more rapid farm restructuring. As the risk for lower demand of assistance under interventions planned during the programming occurs, first of all, it is beneficial to review the identified market drawbacks (are they still relevant under the changing socio-economic situation?), discuss the attractiveness of assistance conditions for potential applicants (rules for administration and procedures), and implement more active measures for raising awareness among applicants. For the purpose of solving the problem of insufficient demand of assistance in respect to certain RDP measures, administrating institutions took some measures (mostly to increase the activeness of applicants under Afforestation of agricultural land ; see Section of the report). Has the fund allocation foreseen at the beginning of the programming period met the RDP objectives and the needs of potential applicants? 54

55 The dynamics of the funds absorption and applications under individual RDP measures discussed above, show that the originally estimated distribution of funds for overall and specific objectives of the RDP did not fully meet the needs of potential applicants. Data provided in Tables and show that during the implementation of this RDP in Lithuania the demand for funds was higher than expected for the following three objectives of the RDP: improvement of income for farmers, improvement of the environment and assistance for agricultural producers in order to take their production and livestock farming facilities into compliance with applicable EU requirements. Meanwhile, the utilisation of funds estimated during the programming for other objectives of the RDP (promotion of alternative income in rural areas, improvement of agricultural structures and competitiveness) was lower Financial effectiveness What was the financial effectiveness (actual spending in relation to forecast expenditure)? Financial effectiveness of Priority A measures. Table shows that most of financial assistance was directed to measures of priority (A) Environment and less favoured areas. In the programming stage almost half (46%) of the total budget of the RDP was estimated for the measures under this priority; however, as a result of a massive demand for assistance under these measures and facing a risk that funds allocated for measures under other priorities may not be fully absorbed, the share of assistance for the three measures under Priority A was increased, and at the end of the implementation of the programme the total assistance to this priority amounted to 62% of the total budget of the RDP. Table Physical and financial indicators of the measures of priority Environment and less favoured areas * Measure Indicator Planned Actual data Number of beneficiaries: 70, ,825 Less favoured areas and areas with environmental restrictions Agri-environment Meeting standards Number of hectares supported (ha) 1,496,983** 1,014,567 Amount of public Total expenditure (million EUR) of which EAGGF Number of beneficiaries: 3,000 2,959 Number of hectares supported (ha) 60,000 94,418 Amount of Total public expenditure of which EAGGF (million EUR) Number of beneficiaries: 8,000 (according to the Milk Directive) + 2,650 (according to the Nitrate Directive) 5,684 55

56 Measure Indicator Planned Actual data Amount of public expenditure (million EUR) Total of which EAGGF *Table provides physical and financial (support paid) indicators of 31 December 2007, as later data pertaining to physical indicators are unavailable to the evaluator. The latest financial indicators are provided in Table **The total area of land classified as LFAs or Natura 2000 areas is given. Target indicators for the RDP were established for each year, respectively 606,900 ha for 2004, 714,000 ha for 2005, and 835,100 ha for Sources: Ministry of Agriculture of the Republic of Lithuania. Lithuanian Rural Development Plan ; Ministry of Agriculture of the Republic of Lithuania. Report on the Implementation of the Lithuanian Rural Development Plan in 2007, May The comparison of the RDP funds allocation among the measures shows that the majority of RDP funds, i.e. the total of EUR million, were allocated for compensatory allowances for farming in less favoured areas. This amounts to 5% (EUR million) of the total RDP budget in addition to the amount planned in the programming stage. This assistance was the basis for the area of million ha classified as LFAs and Natura 2000 areas approved by Orders Nos. 3D-72 and 3D-287 of the Minister of Agriculture 19. Subject to the category of LFAs (the less disadvantaged or highly disadvantaged areas) in which the beneficiary s farm was located, annual payment of or EUR/ha was paid; the payment for farming in areas with environmental restrictions amounted to 89.2 EUR/ha 20. The payment was calculated based on the average difference in gross profit received while farming in the least/highly disadvantages areas and in Natura 2000 areas and while farming in favoured areas. The average annual payment per farm amounted to EUR 679, while the average annual payment per hectare was EUR 59 21, and this proves that the RDP provided more assistance to farms located in less disadvantaged areas. The analysis of target indicators of this measure shows that the planned objectives of the measure were exceeded: the indicator pertaining to beneficiaries was exceeded by 50%, while indicators pertaining to supported hectares were exceeded by 57%, 39% and 27% in 2004, 2005 and 2006 respectively. The evaluation on the national level shows that supported hectares amounted to 68% of the total number of hectares attributed to these areas; therefore, it can be stated that in the RDP significantly influenced the improvement of income for Lithuanian farmers engaged in LFAs. According to the latest financial distribution, 15% of total funds (the original distribution only provided for 10%) were allocated for Agri-environment. The demand for compensatory allowances (34% (EUR million) more assistance was provided than planned during the programming) can be first of all explained by the awareness of the measure and the experience of potential beneficiaries, as organic agriculture programmes are being implemented in Lithuania since 1987 (the Tatula Fund), and from 1997 to the EU accession the organic farming was promoted by the Rural Support Fund and the Special Rural Support Programme. The analysis of target indicators of this measure (see Table ) shows that compensatory allowances were received almost by all farmers who were expected to receive them (2,959 farmers received payments, and the expected number was 3,000). Furthermore, assistance was received by larger farms; therefore, the indicator pertaining to supported hectares (94,418 ha) exceeds the original target by more than a half. Assistance under this measure was provided according to the following four schemes: (1) Protection 19 Orders Nos. 3D-72 and 3D-287 On Less Favoured Areas of 2004 of the Minister of Agriculture (Official Gazette, No , 2004; Official Gazette, No , 2004). 20 Payments under the measures of the RDP for are summarised in Annex Monitoring tables of the NPA Common indicator tables for monitoring rural development programming

57 of shore belts of surface water bodies in meadows and arable land and prevention of soil erosion, (2) Landscape Stewardship Scheme, (3) Organic Farming Scheme, and (4) Rare Breeds Scheme. However, 98.5% of the total funds of the measure were disbursed under the Organic Farming Scheme; therefore, a conclusion can be drawn that this measure had a special impact on the development of organic farming in Lithuania. Since 2003, the certified organic farming area has increased from 23,300 ha (0.9% of the total utilized agricultural area of the country) to ha (4.4% of the total utilized agricultural area of the country). The implementation of the measure and the reasons behind the success/failure are analysed in more detail in Section 5.3 of the report. Meeting standards became the second measure of the RDP according to the amount of financial allocations after the funds of the RDP were reallocated in respect of this measure. Funds allocated under this measure amounted to EUR million more (or the RDP budget greater by 7%) than planned during the programming of the RDP. The total of 18% of the total RDP budget was allocated for this measure. However, assistance was used by a fewer farms than was planned, i.e. by 5,684 agricultural operators, of which 4,131 were seeking to implement the provisions of the Milk Directive, and 2,496 the provisions of the Nitrate Directive (some of them implemented provisions of both directives). Financial effectiveness of Priority B measures. The RDP had the lowest intervention impact on the alternative use of agricultural land. Table Physical and financial indicators of the measures of priority Alternative use of agricultural land * Measure Indicator Planned Actual data Number of beneficiaries: 2,500 1,022 Afforestation of agricultural land Number of hectares supported (ha) 12,000 4,744 Amount of Total public expenditure of which EAGGF (million EUR) *Table provides physical and financial (support paid) indicators of 31 December 2007, as later data pertaining to physical indicators are unavailable to the evaluator. The latest financial indicators are provided in Table Sources: Ministry of Agriculture of the Republic of Lithuania. Lithuanian Rural Development Plan ; Ministry of Agriculture of the Republic of Lithuania. Report on the Implementation of the Lithuanian Rural Development Plan in 2007, May Funds allocated to the sole measure planned under this priority, i.e. Afforestation of agricultural land, were reduced by 4 times to EUR 6.97 million (which only amounts to 1% of total funds of the RDP), while only one-third of the indicator pertaining to afforested hectares was achieved 4,744 ha were afforested instead of the expected 12,000 ha. The expected number of beneficiaries was not achieved either. It should be noted that a similar measure had to be implemented in Lithuania under the SAPARD programme; however, no assistance was provided to any project. The unattractiveness of the measure for potential applicants is determined by many factors, such as a long investment payback period (the average of 30 years), a complicated procedure for receiving assistance (the requirement to present a permit for afforestation, to develop the afforestation project), excessively high requirements for afforested land (afforestation is permitted only in land of good agricultural condition), the too low maximum amount of payments established for afforestation and forest maintenance, the problem pertaining to the balance of payments, i.e. the competition of payments received under this measure with the opportunity to receive direct payments and compensatory allowances under the LFAs measure of the RDP. To encourage the 57

58 activity of applicants, competent authorities took specific actions: RDP and rules for the administration for the measures were amended, the awareness campaign was undertaken, and cooperation with social partners was initiated. To encourage the activity of applicants, competent authorities could have also considered other factors that motivate applicants to submit applications, such as the increase of the rate of payments 22 and the expansion of the circle of eligible applicants. Financial effectiveness of Priority C measures. A quarter (26%) of the RDP budget was assigned for priority (C) Farms restructuring ; however, as a result of the failure to absorp funds under both measures under this priority, the assistance share of the RDP financial plan was reduced by 10%. Table Physical and financial indicators of the measures of priority Farm restructuring * Measure Indicator Planned Actual data Number of beneficiaries: 30,000 20,547 Number of hectares released (ha) 105,000 51,832 Early retirement Number of milk quota released, tons 240, ,781 Amount of Total public expenditure (million EUR) of which EAGGF Number of beneficiaries: 14,000 2,634 Support for semi-subsistence Amount of Total farms undergoing restructuring public expenditure of which EAGGF (million EUR) *Table provides physical and financial (support paid) indicators of 31 December 2007, as later data pertaining to physical indicators are unavailable to the evaluator. The latest financial indicators are provided in Table Sources: Ministry of Agriculture of the Republic of Lithuania. Lithuanian Rural Development Plan ; Ministry of Agriculture of the Republic of Lithuania. Report on the Implementation of the Lithuanian Rural Development Plan in 2007, May A partially lower than expected absorption of funds can be explained by the fact that one of the measures, i.e. Early retirement, is a new measure in Lithuania. Besides, agricultural activity to Lithuanian farmers (especially people of older age) becomes sort of a lifestyle rather than means of subsistence alone; in some cases the formed mindset, tradition, and attachment to land preconditioned the decision of potential beneficiaries to refrain from early retirement. Yet another factor that discouraged farmers to retire from commercial production was the opportunity to receive direct payments and receive support under other RDP measures (especially the compensatory allowances offered under the LFAs measure). There is a correlation between this measure and Less favoured areas and areas with environmental restrictions : fewer applications were received under measure Early retirement in counties eligible for allowances for farming in LFAs. On the other hand, this measure was especially important for Lithuania, as at the beginning of 2004, 49.4% of farmers were older than 60, while young farmers under 40 years old accounted for mere 13.4% of all farmers; therefore, even though only 2/3 of funds estimated in the original RDP financing plan were absorbed and the physical indicators were not fully achieved, one can state that measure Early 22 According to Council Regulation No. 1257/1999 of 17 May 1999, the highest annual additional payment to cover for income lost as a result of afforestation is from 725 EUR/ha (for farmers and their associations) to 185 EUR/ha (for all other subjects of private law); meanwhile, the amount established under the Lithuanian RDP measure was EUR/ha (depending upon the degree of disadvantage of the afforested area) and EUR/ha respectively. 58

59 retirement contributed to the restructuring and the increase of the competitiveness of the agricultural sector, and at the same time positively influenced the rural demographic situation, i.e. maintained farmers in the countryside and ensured income for older farmers who decided to abandon agricultural activity. As a result of the implementation of this measure, 51,832 ha of agricultural land were transferred to younger farmers, while the average annual compensatory allowance regarding the lost income by the releasing farmers was EUR 2,023 per person 23, which confirms the release of smaller farms, just as it was expected during the course of programming. Of all the measures of the RDP, the implementation of Support for semi-subsistent farms undergoing restructuring was the least successful. Only a quarter (EUR 22.8 million less) of financial inputs estimated in the programming stage was allocated under this measure; i.e. EUR million was paid to 2,634 semi-subsistent farms 24. As a result of the low activity of potential applicants (beneficiaries under this measure accounted for approximately 7.7% of farms eligible according to the farm size and the production volume requirements) 25, RDP measure Support for semi-subsistent farms undergoing restructuring only partially contributed to the mitigation of the problem identified in the Lithuanian agricultural sector during the programming period, i.e. the lack of cash flows in semi-subsistent farms. 23 Monitoring tables of the NPA Common indicator tables for monitoring rural development programming Based on the latest (the fifth) financial reallocation. 25 Based on the data provided by the RDP, there were 34,000 such farms. 59

60 5. EVALUATION OF RDP MEASURE IMPLEMENTATION This part of the evaluation report researches implementation of separate RDP measures: first of all, it introduces objectives of the specific measure, the allocated and the absorbed funds, as well as the prospective medium or long term impact defined in the RDP (as illustrated by the intervention logic (the logical diagram of impacts)); on the basis of the EC evaluation guidelines, common evaluation questions are answered providing values of criteria and indicators; in addition, supplementary evaluation questions relevant for the Lithuanian RDP are analyzed Early Retirement The Early retirement measure indented to contribute to the implementation of the first overall objective of the RDP improvement of agricultural structure and increasing competitiveness. The measure was compensatory aiming to reimburse the income lost due to retirement from commercial agricultural production. The aid covered payments made on the annual basis for a period no longer than 15 years (but not beyond the 75th birthday of the beneficiary). The measure had overall, specific, and operational objectives planned; these objectives are reflected in the intervention logic of the measure, which is supplied below Intervention Logic of the Measure The intervention logic for the Early Retirement is illustrated below (factors presented in column two correspond specific objectives, meanwhile the ones in column three overall objectives). As shown, the measure was aimed at transferring farms (land and milk quotas) from elderly farmers to young farmers ensuring an income level among the farmers (transferors), farm workers and family members of transferors with the intention of enhancing and supporting the competitiveness of the agricultural sector and increasing farm size. The land release should enhance the competitiveness of agricultural sector with a help of younger and economically stronger transferees. In other words, the measure tried to establish a win win situation for everybody who was involved in the measure. Figure Intervention logic of the measure Early Retirement 60

61 Reduced age of farmers Land is transferred to young farmers Increased farm size Early Retirement Milk quotas are released to the State Milk Quota Reserve Ensured income level for elderly retired farmers, farm workers and family helpers Non-commercially viable land is released for nonagricultural activity Increased competitiveness Relevance of the measure and pertaining planned objectives are reasoned by data on structure of Lithuanian farms and the demographic situation of the rural population. In Lithuania, 2003, the average size of a farm according to the utilised agricultural area amounted to 9.1 ha; meanwhile in the EU-15, it was twice as large, i.e ha. Also, yet another relevant issue was related to a large number of elderly farmers: in 2003, almost half of all registered farmers were older than 60, 37% were years old, and only 14% were younger than 40 years old. 26. Such age structure of farmers was unbeneficial to development of average-sized farms, improvement of effectiveness and competitiveness of the agricultural sector, and an increase of the level of income. Yet another problem that should have been solved was related to a large number of small dairy farms: on the basis of the Census of Agriculture 2003 in Lithuania, the total number of cow raising farms amounted to 192,259, from which 78% (or 149,022) of farms had 1-2 cows and 20.5% (or 39,443) of farms had 3-9 cows. Thus, farms with more than 10 cows amounted to as little as 1.5% of the total number of cow raising farms. Besides, the majority of dairy farmers were of older age. These two factors a small number of cows and the age of farmers contribute to each other, i.e years old farmers were dominating in small dairy farms (with less than 5 cows) Implementation of the Measure Overall, specific, and operational objectives planned in the description of the RDP measure were related to outcomes, results and impact of the measure with quantitative objectives set. Table provides the achievement level of measure output and result indicators. Table Achievement of indicators pertaining to the Early retirement measure Indicators Measurement unit Planned Implemented Percentage of implementation 26 Data of the Farmers Farm Register of the Republic of Lithuania 61

62 Output indicators Number of Units 30,000 20, % beneficiaries A percentage of % percentage small dairy farm point holders in the overall number of beneficiaries The average amount t % of milk quota to be released The average size of a ha % transferred holding Result indicators Milk quota released t 240, , % Area of transferred ha 105,000 51, % land Area of land released for non-agricultural purposes ha 5, % Source: Ministry of Agriculture of the Republic of Lithuania. Report on the Implementation of the Lithuanian Rural Development Plan in 2007,,, May Analysis of achievement of the measure output and result indicators resulted in a positive evaluation despite the fact that some indicators were not achieved. On the basis of evaluation delivered by representatives of responsible authorities, the measure received a lot of interest. In respect of time, implementation of the measure was consistent and continuous, i.e. the comparison of different years failed revealing a more significant variance in activeness of applicants (refer to Table ). Table Achievement of output and result indicators by years Indicator s Forecast Factual Forecast Factual Forecast Factual Forecast Factual Number of beneficiari 9,500 6,509 19,500* 14,032* 30,000* 20,011* 30,000* 20,547* es Area released, 30,000 11,301 65,000* 29,736* 105,000* 51,360* 105,000* 51,832* ha Milk quota released, t. 120,000 42, ,000* 93,827* 240,000* 155,865* 240,000* 156,781* * - total indicators Source: Ministry of Agriculture of the Republic of Lithuania. Report on the Implementation of the Lithuanian Rural Development Plan in 2007, May The planned indicator pertaining to the number of beneficiaries has been achieved by 68%. According to this measure, half of beneficiaries were small dairy farm holders; even though, farm employees who were able to use the aid under this measure as well - failed taking this 62

63 opportunity, since only 1 farm employee received the aid 27. Indicators pertaining to average milk quota released and a holding transferred have been achieved by 100%. Considering the smaller-than-planned number of beneficiaries, result indicators of the measure were achieved to a smaller extent, i.e. the area of transferred land amounted to 49% of the objective; meanwhile milk quotas to be released amounted to 65%. The EU aid (direct payments and other RDP measures) boosted utilization of agricultural land for agricultural activity (i.e. stimulated the use of land for its original purpose), thus, only 11% of the planned indicator was released for nonagricultural purposes. Assessing implementation of the measure in the general context of the Lithuanian agriculture, the area of land transferred under the measure amounted to 2% of the total utilized agricultural area (UAA) in Meanwhile, the released milk production quota amounted to 4.8% of the total national milk production quota set for Lithuania for and (amounting to 3, thousands of tons 28 ). One of the reasons for non-achievement of all indicators of the measure is related to the deficiency of experience in the area of implementation of such measures as well as an excessively optimistic planning. Besides, agricultural activity to Lithuanian farmers especially people of older age becomes sort of a lifestyle rather than means of subsistence alone; in some cases the formed mindset, tradition, and attachment to land preconditioned the decision of potential beneficiaries to refrain from early retirement. Yet another factor that discouraged farmers to retire from commercial production was the opportunity to receive direct payments and receive support under other RDP measures (especially the compensatory allowances offered under the LFAs measure). While implementing the measure, some problems were encountered due to insufficient explicitness of administrative provisions. The RDP incorporated a provision stating that in order to avoid possible overcompensation the fixed part of the annual payment should be reduced by the annual amount of social benefits received. This provision was insufficiently accurate in rules for administration of the measure as well: while designing the rules, the drafters had in mind that payments received by the beneficiary under the measure should be reduced by the total amount of all social benefits received by the beneficiary, meanwhile beneficiaries included only the state social insurance pension benefits received for that date without consideration of the state social insurance pension benefits to be received in the coming years. The aid was paid for the upcoming calendar year. The aid was overpaid as the NPA had no information on the amount of the state social insurance pensions to be received during the entire period of the upcoming year. Considering the recommendation issued by the National Audit Office, the overpayment that accrued in respect of such beneficiaries was deducted from the aid paid for the following year. This problem resulted in numerous complaints to the Ministry of Agriculture 29. In order to avoid overpayments, rules for administration of the measure were adjusted, i.e. the fixed part of payments is paid subsequent to receipt of factual data from the State Social Insurance Fund Board for the last calendar year. Considering the impact of the measure, it is very important to underline that only one of the overall objectives had quantitative values, i.e. indicators pertaining to increase of farm size and improvement of structure. The RDP provides that subsequent to implementation of the measure, the following objectives would be achieved: Table Achievement of impact indicators pertaining to increase of farm size and improvement of structure 27 Data of the National Paying Agency from implementation monitoring tables of the Rural Development Plan 28 Data of the Agricultural Information and Rural Businesses Centre < 29 Interviews with representatives of responsible authorities 63

64 Indicators Impact indicators Increase of an average farm size Increase of an average herd of dairy cows (number of cows per farm) A number of elderly (>55 y.o.) farmers as a portion of the total number of farmers A portion of young farmers (<40 y.o.) in the total number of farmers Measurement unit Planned Implemented Percentage of implementation ha (10.6* **- 2007) Number of ** cows (2.3*- 2003) 91 % 108 % % *** -16 percentage points % *** -4.7 percentage points Source: Ministry of Agriculture of the Republic of Lithuania. Report on the Implementation of the Lithuanian Rural Development Plan in 2007; *results of the Census of Agriculture 2003 in Lithuania; **results of the Farm Structure Research 2007; *** data of the Agriculture and Rural Business Register of the Republic of Lithuania (distribution of holding owners depending on age) General changes in indicators on the scale of the entire state were discussed in Section 3 of the evaluation report. In accordance with the analysis of general changes of the Lithuania rural socioeconomic situation as well as data of the Table , it seems that the overall objective of the measure regarding the increase of farm size and improvement of the structure of rural areas was achieved only partially. Indicators related to farm size may be positively evaluated, i.e. the average farm size was increased by 2 ha and in comparison to the initial situation the average number of dairy cows per farm was increased by almost 1 cow, i.e. from 2.3 to Although it should be underlined that farm enlargement process was rather slow in comparison to the general average size of farms in the EU-15. Considering the fact that beneficiaries comprised to 7% of the total number of farms existing in , it may be suggested that the aid had a fair impact on structure of farms. Still, in accordance with the indicator of the average size of a released holding (which was rather small and amounted up to 3.56 ha), an assumption may be drawn regarding a somewhat little impact made by enlargement of farms. Demographic indicators were also improved, although did not reach the planned level, i.e. in 2007, the portion of holding owners aged 55 and more amounted to 61%, meanwhile young owners up to 40 years old amounted to as little as 12%. 31 This provides that during the period of the RDP implementation, positive changes occurred in the process of altering the prevalent age of farmers; still, the age structure, which is dominated by the greater portion of pre-retirement and retirement age holding owners, prevails. Considering the extent of measure implementation, it may be suggested that it partially contributed to implementation of two remaining overall objectives. First of all, the aid committed under this 30 The number of farms producing agricultural products and containing one or more hectares of agricultural land in their land holding amounted to 278,563 in 2003 (results of the Census of Agriculture 2003 in Lithuania). 31 On the grounds of data on holding owners, as according to eligibility criteria owners that registered the land holding in the Register could be regarded as beneficiaries (they were not required to register in the Farmers Farm Register of the Republic of Lithuania). 64

65 measure assured income to more than 20 thousand of elderly farmers who made their decision to retire from commercial agricultural production. A possibility to receive payments encouraged farmers to abandon commercial agricultural production. In accordance with data of monitoring tables, the average payment per farmer amounted to EUR 1,793 in 2005, EUR 1,945 in 2006, and EUR 2,332 in 2007; thus, the average annual payment for farmers during the period of the RDP implementation amounted to EUR 2,023 per annum. The last overall objective of the measure aiming to increase competitiveness of the agricultural sector was also partially implemented. It is difficult to estimate the impact and calculate it in quantitative terms, although the increase in an average farm size contributed to the objective. Besides, work efficiency in the farm as well as competitiveness of the agricultural sector itself is closely related to the age of farmers, i.e. a farmer younger than 35 produce twice as much of agricultural output than a retirement age farmer 32. Thus, reduction in the number of retirement age farmers as well as increase in the share of young farmers improved the work efficiency. According to this measure, farm transferees were required to prove economic viability of their farm in 5 years subsequent to the takeover of the farm. The impact was enhanced by compatibility of the measure with the SPD, i.e. a farmer taking over a holding according to the RDP measure had an opportunity to use aid (they were even prioritized) under the SPD measure Setting-up of Young Farmers, which was also aiming to improve the competitiveness in the sector of agriculture since young farmers are capable of more efficient adaptation to modern technology changes and new competitive environment. The competitiveness was also increased by reduction in small dairy farms. Upon Lithuania s accession to the EU, these farms faced difficulty due to quality or raw milk as they had no funds to acquire equipment required for milk quality assurance. Thus, the measure was designed to promote early retirement of such farmers and releasing milk quotas to a reserve; this way the released quotas were transferred to younger and more promising producers 33. In 2003, farms with 1-9 cows amounted to 98.5% of the total number of dairy farms; in 2007, this portion reduced to 95.3%. Besides, the average number of cows per farm also increased. Next, in this part of the report we shall look at implementation, achieved results, and impact of the measure Early Retirement considering the common evaluation questions formulated by the European Commission as well as national issues relevant in case of the RDP of Lithuania. Indicators of monitoring tables were used to respond to these questions as well as data from the NPA and RDPAIS and results from the survey of beneficiaries. Aiming to evaluate the data of programme level in the general context, statistical data on agriculture and rural areas were used Analysis of Common Evaluation Questions IV.1. To what extent has aid for early retirement contributed to the earlier transfer of farms? IV.1-1. Released land is transferred to younger farmer(s). One of the overall objectives of this measure was to resolve the demographic problem of the rural population, i.e. to encourage elderly people to retire from commercial agricultural production and transfer farms to younger farmers. Aid provided under this measure was assigned to farmers aged from 55 years old to retirement age, i.e. 32 Ministry of Agriculture of the Republic of Lithuania. Report on the Implementation of the Lithuanian Rural Development Plan in 2007, May This was also relevant to farm transferees as dairy farm owners had no other possibility to receive additional milk quotas until Since 2007, milk quota auctions were established. 34 According to data of the Census of Agriculture 2003 in Lithuania, the Farm Structure Research 2007, and the Farmers Register 65

66 60 years old for women and 62.5 years old for men. Owners of small dairy farms could become transferors at retirement age, i.e. up to 70 years old. A farm transferee had a set age limit amounting to 50 years old. The RDP planned objective for the average age of transferors is 58.5 years old. On the basis of the data from monitoring tables, the age of beneficiaries-transferors had the following distribution: Table Distribution of farm transferors depending on age groups y.o y.o. More than 65 y.o. Number of beneficiaries A share of the total number of beneficiaries, in % Source: Data of the National Paying Agency from implementation monitoring tables for 2005 and 2006 of the Rural Development Plan for Thus, on the basis of monitoring tables, the majority of beneficiaries (39%) were years old; 34% of transferors were between years old; and 27% of transferors were elder than 65 years old. The average age of farm transferors amounted to 62.5 years old 35. Thus, it was bigger than planned in the RDP. With reference to the survey of beneficiaries, more than half of all respondents were younger than 60 years old at the time of their farm release. Almost one-fifth of all respondents was comprised of beneficiaries older than 70 years old. Fig Distribution of farm transferors by age groups Respondents by age at the beginning of the measure implementation % of respondents supported under Measure 1 of the RDP, n=52 52% 12% 17% 19% years old 60-62,5 years old 62,5-65 years old years old Source: TNS Gallup. Report of the Survey of Beneficiaries supported under measures of the RDP According to the survey data, a large share of farm transferees consisted of family members of farm transferors (37% of respondents). The majority of remaining transferees were attributed to the category of young farmers, i.e. up to 40 years old. They amounted to 73% of the total number of farms transferred to non-family members. 35 On the basis of data supplied by the NPA from RDPAIS 66

67 Fig Distribution of farm transferees by age groups Age of transferees who took-over the land of respondents at the beginning of the measure implementation % of respondents supported under Measure 1 of the RDP, n=52 17% 37% 27% 10% 10% years old years old 36% years old Transferred to a family member Land was not transferred (dairy farm, etc.) Source: TNS Gallup. Report of the Survey of Beneficiaries supported under measures of the RDP The survey data is supported by accurate data supplied by the NPA on age of farm transferees, i.e. on the basis of RDPAIS, the average age of farm transferees fell into the category of young farmers and amounted to 34 years old. The operational objective aimed for retirement of 30 thousand farmers elder than 55 years old from commercial agricultural production and transfer of their farms to younger people. Implementation of the measure achieved 68% of the planned indicator, i.e. the aid was received by more than 20 thousand of elderly farmers who retired from commercial agricultural production. Considering the unachieved number of beneficiaries, the planned total area of released land was not achieved either, i.e. half of the planned area of land was transferred (approx. 52 thousand ha were transferred instead of 105 thousand ha). 11% of the planned area was released for non-agricultural purposes. On the other hand, the indicator of the average transferred farm area was implemented by 100%: the average size of the released area amounted to 3.56 ha. The reasons for non-achievement of the aforementioned indicators were discussed earlier while analyzing implementation of the measure (Section ) and achievement of indicators. Data received from the survey provides that the majority of farmers who transferred their agricultural land had small farms, i.e. as many as 82% of farmers transferred only up to 10 ha of land: almost one third of respondents transferred from 1 to 3 ha and from 4 to 6 ha (29% each) of land; just a little less than one quarter (24%) stated that they transferred 7-10 ha of land. And only 18% of beneficiaries indicated that they transferred land, the area of which amounted to 11 ha and more. Fig Distribution of beneficiaries according to the area of transferred land 67

68 How many hectares of agricultural land have been released? % of respondents supported under Measure 1 of the RDP and having released their land, n=38 29% 29% 24% 8% 5% 5% 1-3 ha 4-6 ha 7-10 ha ha ha ha ha 0% 82% Source: TNS Gallup. Report of the Survey of Beneficiaries supported under measures of the RDP Evaluation (conclusion): During the RDP implementation period, there were positive trends observed in respect of age change of farmers (farmers were getting younger). Still, this process was somewhat slow. Positive change was influenced by implementation of the RDP measure, although its impact on change of age of farmers was less significant than planned: fewer farmers at the average age of 62.5 years old retired from commercial agricultural production than it was forecasted; smaller than planned area of land was transferred; still, the average farm transferee age fell into the category of young farmers (34 years old). IV.1. A. To what extent has the aid for early retirement contributed to the earlier transfer of farms, in particular, to what extent has there been synergy between early retirement and setting-up of young farmers in terms of an earlier change of holders? IV.1.A-1. There is a significant amount of simultaneous take-up of the two aid schemes On the scale of the National Rural Development Strategy, the compatibility of the RDP and other framework documents was ensured. One of the cases is the relation between the Early Retirement measure and the SPD measure Support for Young Farmers. Both of the aforementioned measures are focused on resolution of the same problem, i.e. to neutralize the tendency of aging farmers. In accordance with the RDP measure, aid is supplied to elderly people retiring from commercial agricultural production, meanwhile the SPD measure provides support for setting-up as the basis for further development of a farm. The interrelation of these two measures was guaranteed by prioritizing beneficiaries of the SPD measure on the condition that at the same time they take-over a farm from a participant of the RDP measure Early Retirement funded from the part of the EAGGF guarantees, or from parents elder than 55 years old 36. This condition was established as a priority criterion in the SPD measure. This way, young farmers were encouraged to take-over farms from farmers retiring according to the Early Retirement measure. On the basis of data supplied by administrative authorities, 111 of young farmers (participating in the SPD measure Support for Young Farmers) were farm transferees 36 Single Programming Document of Lithuania,

69 according to the RDP measure: these cases only amounted to 0.5% of the total number of beneficiaries of the aid provided according to the RDP measure, although amounted to 16% of the total number of beneficiaries of the SPD measure. Evaluation (conclusion): on the programme level, there is a relationship ensured between the measures for Early Retirement and Support for Young Farmers, although during implementation of the RDP, a comparatively small number of cases were registered when both measures were used. IV.1.A-2. There is an additional reduction of the average age of the beneficiaries of early retirement in the case of combined aid. With reference to the answer to question IV.1., it should be stated that the majority of beneficiaries of the measure fell into the age group from 55 to 60 years old (39% of beneficiaries). Although, this group was significantly larger than the number of beneficiaries aged from 60 to 65 years old, which accommodated 34% of beneficiaries. Only small dairy farm owners were able to receive aid at the age exceeding 65 years old; small dairy farm owners totalled to approximately half of the number of beneficiaries of the measure, although only 27% of beneficiaries fell into this age group. It can be presumed that the possibility designed to young farmers to use the aid according to the SPD subsequent to take-over of a farm encouraged farmers to release their holdings earlier. Still, the evaluator cannot supply specific data regarding the level of achievement of this criterion as the NPA did not collect such data with the help of the RDPAIS. Besides, the average age of the beneficiaries (62.5 years old) demonstrated that farm transferors were older than planned, thus the SPD measure had no significant impact in promoting the earlier transfer of farms. Still, the evaluator believes that it is important to take into account the fact that combined aid had to contribute not only to younger age of transferors, but also of transferees. On the basis of aid provision conditions according to the RDP measure, a farmer up to 50 years old could be regarded as a farm transferee (this condition does not apply to family members); meanwhile only applicants below 40 years old could receive aid according to the measure for Support for Young Farmers. Thus, a farm transferee aiming to receive aid under the Support for Young Farmers measure had to correspond to a more robust age requirement, i.e. not to be older than 40 years old. In order to receive aid according to both schemes, a 40 years old requirement is applied to both measures. It should be underlined that farm transferees were somewhat young, i.e. the average age of farm transferees amounted to 34 years old. Evaluation (conclusion): on the programme level, the opportunity designed for young farm transferees to utilize the SPD possibilities has created necessary preconditions to encourage elder farmers to release their farms earlier, although the evaluator has no possibility to provide quantitative evidence; meanwhile older than planned age of transferors demonstrated that compatibility of both measures had no fundamental impact. Still, this factor might have contributed to younger age of farm transferees (the average age of young farmers amounted to 34 years old). IV.2. To what extent has the economic viability of the remaining agricultural holdings improved? IV.2-1. Improvement in the factors of production. The measure was aimed at improving the structure of farms and increasing the size of an average farm. According to this measure, beneficiaries could transfer their land to transferees who could merge the transferred farm or a part of it with their own land holding or undertake a new commitment to engage in agricultural practice in the transferred farm. Such merger of farms resulted in increase of transferee farm sizes and increase of the area of land under ownership. This way, production factors were improved. 69

70 During the period , the average size of a Lithuanian farm grew from 10.6 ha to12.6 ha. Thus, the size of land as a factor of production has increased, which contributed to production effectiveness. Evaluating the impact of the measure in increase of an average farm size, it is important to consider its significance within the general context of the state: more than 20 thousand beneficiaries participated in the measure, which amounts to 7% of the total number of farms in 2003; according to the measure, almost 52 thousand ha of land area was transferred, which amounts to more than 2% of the total UAA in Still, it should be underlined that in some cases the farm size was not increased: in case of some applications a farm could be transferred to a newly settingup farmer. Evaluation (conclusion): in summary, it could be maintained that during the period of the RDP implementation, farm enlargement process took place on the scale of the entire state, although it remained slow just as during the previous periods. Implementation of the Early Retirement measure has contributed to positive structural changes of farms as well; although the scope was smaller than planned (the area of released land transferred was twice smaller than the indicator planned in the RDP). IV.2-2. Viable production conditions in relation to production restrictions. Under the measure, small dairy farm owners formed a separate target group that was provided aid for the size of milk quota released. Small dairy farm owners were unable to ensure effective production without the required quality of raw milk. In the light of these facts, implementation of this measure was aimed at retiring elderly small dairy farm owners and transferring milk quotas to the national milk quota reserve. Quotas from the national milk quota reserve could be transferred to younger and more promising producers 37. This way, their production conditions could be improved considering the obligations of Lithuania anticipated by the EU, i.e. the assigned total milk production quota. The size of the milk production quota released according to the measure amounted to 156,781 tons, which amounts to 4.8% of the total national milk production quota for Lithuania for and (3, thousands of tons). Evaluation (conclusion): implementation of the measure contributed to improvement of production conditions in farms, transferring milk production quotas of small dairy farms to the national milk quota reserve. Still, the input of the measure was smaller than planned as the indicator for released milk quota was not achieved. IV.3. Was the income offered to the transferors appropriate in terms of encouraging them to abandon farming and subsequently offering them a fair standard of living? IV.3-1. The level of income is satisfactory and provides an incentive to stop farming. The constant part of aid was paid to beneficiaries. It was calculated as the average of the state social insurance old-age pension forecasted for the period and amounted to EUR 1,290. Additional annual payment amounting to EUR 64 was paid to those applicants who had a dependent spouse. A variable part of aid was paid for a released land or milk quota; this payment amounted to EUR 90 per 1 ha of land per annum; meanwhile for 1 ton of milk quota, payments were made in the period of three years in order of reduction, i.e. EUR 175, EUR 150, and EUR 125 and an annual payment amounting to EUR 80 for the remaining years. On the basis of monitoring data, an average payment per farmer amounted to EUR 1,793 in 2005, EUR 1,945 in 2006, and EUR 2,332 in 2007, thus, the average annual payment for farmers during the period of the RDP measure implementation 37 This was also relevant to farm transferees as dairy farm owners had no other possibility to receive additional milk quotas until Since 2007, milk quota auctions were established. 70

71 amounted to EUR 2,023 (which totals to 84% of the average income per one household member in rural areas in 2007). Hired employees receiving aid were only paid an annual fixed part of aid amounting to EUR 1,290 (this corresponds to the amount of the average aid per one employee). However, it should be noted that this measure was only used by one farm employee. Aid provided according to this measure assured income to more than 20 thousand of elderly farmers who decided to abandon the commercial agricultural production. Half of beneficiaries were small dairy farm owners. Considering the fact that the average size of released milk quota amounted to 8 tons, the average payment for this group of beneficiaries amounted to EUR 2,490 during the first three aid years, and EUR 1,930 for the remaining years. Meanwhile, the average payment to farmers who only released land (the average area of which amounted to 3.56 ha) amounted to EUR 1, Data received from the survey demonstrated that the received aid had a positive impact on income of beneficiaries. The majority of respondents (69%) when asked to what extent their annual household income changed subsequent to retirement from commercial agricultural production and upon commencement of aid, in comparison to previously received income indicated an increase in income. 12% mentioned that income significantly improved/increased, meanwhile more than a half (58%) of respondents indicated that income had reservedly improved/increased. 15% of beneficiaries indicated that their income did not improve/increase ; meanwhile 12% or respondent indicated that their income reduced upon retirement from commercial agricultural production. Fig Change in income received by beneficiaries. To what extent has your annual household income changed subsequent to retirement from commercial agricultural production and due to aid, in comparison to the previous income? % of respondents supported under Measure 1 of the RDP, n=52 Significantly improved/increased Not improved/increased I don't know Reservedly improved/increased Reduced 12% 58% 15% 12% 4% 69% Source: TNS Gallup. Report of the Survey of Beneficiaries supported under measures of the RDP Almost all respondents (93%) who believed that their household income improved or remained the same subsequent to commencement of aid indicated that the received aid made a contribution to increase/maintenance of their income: one-fifth (20%) of respondents believed that the aid had a great contribution to increase/maintenance of their income and almost three-quarters (73%) believed that it had a reserved contribution. 5% of beneficiaries indicated that the aid had no contribution at all to increase/maintenance of their income. 38 These average payment calculations were made on the basis of a precondition that a farmer released either land or a milk quota, and the transferor was not paid an additional payment for a dependent spouse. 71

72 Fig Input of aid in increase/maintenance of income of beneficiaries To what extent has the aid contributed to the improvement/maintenance of income? % of respondents supported under Measure I of the RDP and whose annual income after the support "significantly improved", "reservedly improved" or "not improved", n=44 Great contribution Reserved contribution No contribution at all I don't know 20% 73% 5% 2% 93% Source: TNS Gallup. Report of the Survey of Beneficiaries supported under measures of the RDP Although the majority of respondents indicated that their annual household income had more or less improved subsequent to receipt of aid (69%), still just over one-fifth of respondents (21%) stated that received income (subsequent to retirement from commercial agricultural production) was sufficient to ensure adequate standard of living. More than one-third of beneficiaries (35%) believed that income was only partially adequate; meanwhile more than half of respondents (44%) thought that this income was insufficient. Fig Sufficiency of income of beneficiaries in assuring an adequate standard of living Is the income received after the retirement from agricultural production sufficient to ensure a proper standard of living? % of respondents supported under Measure 1 of the RDP, n=52 Yes 21% Partially yes 35% No 44% Source: TNS Gallup. Report of the Survey of Beneficiaries supported under measures of the RDP Evaluation (conclusion): the measure assured income to more than 20 thousand of farmers retired from commercial agricultural production. In summary, it may be proposed that the amount of income received according to the measure was satisfactory: even though almost half of beneficiaries who participated in the survey indicated that the level of income is insufficient (these results are influenced by subjective evaluations), the majority of respondents had an increase in income and this was achieved due to the aid. Besides, the average amount of annual aid amounted to 84% of 72

73 average income of households in rural areas, per one household member in 2007, and was equal to average income in rural areas in On the other hand, the measure was competing with other RDP measures, especially payments under the LFAs as well as direct payments that were used to assure income for farmers who were not abandoning commercial agricultural production Analysis of National Evaluation Questions To what extent the aid for termination of milk production in small dairy farms paid under the Early Retirement scheme constributed to the restructuring of dairy farming sector? 1. Reduced scope of milk production in small farms. Beneficiaries attributable to the category of small dairy farm owners added up to 50% of the total number of beneficiaries, i.e. more than 10 thousand. With reference to the RDP objectives, the indicator of the number of small dairy farm owners who received aid was not achieved: it was planned that this number would amount to 75% of the total number of beneficiaries. Respectively, the indicator of the size of milk production quota transferred to the national milk quota reserve was not achieved as 156,781 tons were transferred, which amounts to 65% of the planned objective. Still, considering the scope of the entire state, this measure had a significant impact on the dairy farming sector: beneficiaries under this measure amounted to 5% of the total number of cow raising farms in ; meanwhile the milk production quota released amounted to 4.8% of the total national milk production quota for Lithuania for and (3, thousands of tons). As it was already mentioned, up to the beginning of the RDP implementation, Lithuania was predominated by ineffective small dairy farms. Farms of this type continue predominating in 2007 as well, although positive changes are observed. In accordance with the data of the Census of Agriculture 2003 in Lithuania and results of the Farm Structure Research for 2005 and 2007, there are no extensive changes in the rural structure of Lithuania, although there is an observed tendency of reduction of the share of small dairy farms in the total number of cow raising farms: Table Milk sales depending on the size of farms (number of cows) in 2008 Group of farms Number of In Number of In Number In depending farms comparison farms comparison of farms comparison on the to the total to the total to the total number of number of number of number of cows cow raising farms cow raising farms (%) cow raising farms , , , , , , Total 192, , , Source: The first results of the Census of Agriculture 2003 in Lithuania. The Department of Statistics. Vilnius, 2004, and results of the Farm Structure Research for 2005 and 2007 Besides, the average number of cows per farm increased as well, i.e. from 2.3 (in 2003) to 3.23 (in 2007). Appreciating the output of small dairy farms, it could be stated that in the first half of 2008, the majority of producers who sold milk to purchasers according to the quota of 2008/ On the basis of data of the Census of Agriculture 2003 in Lithuania, there were 192,259 cow raising farms 73

74 comprised of small dairy farms, which amounted to 79% of the total number of producers and sold 23% of the total sold cow milk. Table Farms depending on the number of dairy cows 1-5 cows 6-14 cows 15 and more cows Number of producers who sold milk 41,942 7,756 3,349 Quantity of sold milk (t) 151, , ,658 containing natural 4.01% fat content Quantity of sold milk (t) 150, , ,309 containing 3.99% fat content Source: data of the Agricultural Information and Rural Businesses Centre < Evaluation (conclusion): this measure was partially aimed at resolving the problem specific to the Lithuanian agriculture, i.e. reduce the number of small dairy farms. To this end, a separate target group under the measure was designed small dairy farm owners (in possession of less than 5 dairy cows). Under the measure, commercial agricultural production was abandoned by more than 10 thousand of small milk producers. The planned indicator was not achieved, although beneficiaries amounted to 8% of the total number of cow raising farms. Therefore, even though smaller than planned, the RDP made a contribution to reduction of the total number of small dairy farms. To what extent has the measure implementation influenced the strengthening of human capital in the agricultural sector? 1. Strengthened human capital in the agricultural sector. While implementing the measure, elderly farmers were transferring farms to younger farm transferees Transfer of farms to younger farmers strengthens the human capital as younger than 35-year-old farmers produce twice as much of agricultural output than retirement age farmers 40, besides they are more competitive and promising. With reference to the answer to the question IV.1, age difference between farm transferors and transferees participating in the measure was somewhat significant: the average age of transferors amounted to 62.5 years old and transferees 34 years old (refer to analysis of the criterion IV.1-1.of the question IV.1. Released land is transferred to younger farmers ). Not only reduction of age among farmers contributed to strengthening of human capital, but also the increase of the share of farmers with post-secondary education. The beneficiaries survey provides that the majority of farm transferors (67%) had a the secondary level of education at the most: more than a third of beneficiaries (38%) had a secondary education; a little bit less than one third of respondents (25%) only had primary education. The remaining 33% of beneficiaries had a higher than secondary level of education (the majority of them were agricultural specialists). Fig Distribution of farm transferors depending on education 40 Ministry of Agriculture of the Republic of Lithuania. Lithuanian Rural Development Plan

75 Respondents by education % of respondents supported under Measure 1 of the RDP, n=52 No education 4% Primary 25% Secondary 38% Vocational 10% Higher vocational 19% Higher 4% Source: TNS Gallup. Report of the Survey of Beneficiaries supported under measures of the RDP A higher level of education of farm transferees was guaranteed by an eligibility criterion established in rules for administration of the measure stating that a transferee is considered eligible providing on the submission date of the application one has vocational education in the area of agriculture 41. The nature of the required vocational education is regulated under the Order No. 3D- 131 of the Minister of Agriculture of the Republic of Lithuania of 31 March 2003 on Requirements for Vocational Education of a Farmer, according to which adequate vocational education is to be evidenced by a qualification certificate stating that an individual has passed a qualification exam in accordance with the Training Programme for Farming Basics. Strengthening of human capital is also substantiated by a requirement established in the rules for administration of the measure stating that in five years subsequent to take-over of a farm (or a part of a farm) a transferee has to proof economic viability of the, which should be substantiated by submitting a qualification improvement certificate (of 100 hours at least) or other documents proving that the farm-related volume of work or income or owned area of land has increased. Evaluation (conclusion): in summary, it may be stated that the measure implementation has impacted on strengthening of human capital in two aspects, i.e. first of all, elderly farmers (of average age amounting to 62.5 years old) were replaced by younger and more promising farmers with the average age of 34 years old; secondly, farm transferees were not only of younger age but also had a higher level of education Less-Favoured Areas and Areas with Environmental Restrictions Less-favoured areas and areas with environmental restrictions measure has contributed to implementation of the second overall objective of the RDP, i.e. increasing income of farmers. Besides, this measure had to partially contribute to environmental improvement (i.e. implementation of the third objective). This was the only measure that was not applied to the entire territory of Lithuania, but only to territories that were attributed to areas less-favoured for farming as well as areas with environmental restrictions. It contributed to the strategic objective of the Lithuanian regional policy, i.e. to improve territorial cohesion by reducing differences in income of 41 Administration rules of the Measure Early retirement of the Rural Development Plan

76 residents of different regions. With reference to the Council Regulation No.1257/1999, the RDP underlined two types of territories for provision of aid under these measures. The first ones are Less-Favoured Areas (LFAs) 42. LFAs were selected on the basis of the following criteria: (1) Crop yield is less than 80% of the national average; (2) The total value of agricultural output per capita engaged in agriculture is less than 80% of the national average; (3) Density of population is less than 50% of the national average; (4) A share of residents engaged in agriculture is greater than 15%; (5) The average annual regression of population is 0.5% and greater. Specific problematic areas are also attributed to LFAs, i.e. in case of Lithuania these would be intensive karst zones. Considering intensity of natural factors (defined criteria) that limit farming, two more categories were defined: (1) highly disadvantaged areas (HDAs) in the territory of Lithuania, these areas amount to the total area of 301,305 ha (approx. 9% of the total UAA); and (2) less disadvantaged areas (LDAs) amounting to the area of 1,165,678 ha (approx. 34% of the total UAA); intensive karst zones are also attributed to LDAs. Areas with environment restrictions included Natura 2000 areas. These areas were selected on the basis of approved national selection criteria for protection of natural habitats. A portion of Natura 2000 areas was selected for protection of birds nesting in meadows, which were mostly impacted by the prohibition to turn meadows and natural pastures into arable land or make hay no earlier than 15 August. The total area of meadows and natural pastures in Natura 2000 areas selected during the period of the programme design amount to 30,000 ha (approx. 6% of the grand total area of meadows and natural pastures). The measure was of compensatory nature: it was aimed at compensating famers income lost due to farming undertaken in targeted areas. Considering the type of an area, different payments were established (refer to Annex 5 of the report). The measure had overall, specific, and operational objectives planned; these objectives are reflected in the intervention logic (the logical diagram of impacts), which is supplied below Intervention Logic of the Measure The LFA and areas with environmental restrictions measure had a rather simple intervention logic. The measure itself had the intention of compensating farmers living in areas defined as less favoured or in areas with environmental restrictions with a flat rate payment in opposition to that the farmers will comply with Good Farming Practices, resulting partly in a more sustainable use of agricultural land, preservation of landscape and improvement of the environment. The measure also contributed to a stricter application of environmental restrictions in Natural 2000 areas. Moreover, the ensuring of income for farmers in LFA maintained population in these areas as well as farming, thus, ensuring the viability of rural communities. 42 The list of less-favoured areas was approved by Orders No. 3D-72 and 3D-287 of the Minister of Agriculture of 2004 on Less Favoured Areas (The Official Gazette, 2004, No ; The Official Gazette, 2004, No ). 76

77 Figure Intervention logic of the measure Less Favoured Areas and Areas with Environmental Restrictions Improving the environment Farmers comply with Good Farming Practices Maintaining farming by preserving viable rural community LFA and areas with environmental restrictions Ensured income for farmers in LFA and areas with environmental restrictions Meeting environmental restrictions and proper farming Sustainable use of agricultural land Maintaining the countryside Eligibility of the measure is substantiated by territory selection principles. First of all, the need to assure income of farmers is justified by indicators of limited land productivity and the lower-thanaverage total agricultural output value. In 2003, the gross profit in LDAs was on the average 1.6 times less than in favoured areas, while the gross profit of HDAs was on the average 2.04 times less than in favoured areas. Meanwhile, expenses related to farming in Natura 2000 areas significant for protection of birds were exceeding income 43. The need to ensure viability of rural communities is substantiated by social and demographic criteria for selection of territories, i.e. low density of population, high dependence on agricultural activity, and reduction of population. The average regression of rural population during the period in LFAs amounted to -1.09%. 44 Municipalities (19 municipalities) and separately selected sub districts (51 sub district) that satisfied the planned criteria were attributed to LFAs, registered agricultural entities of which could have received aid under this measure. Objectives regarding improvement of environment, delivery of environmental restrictions, balanced utilization of agricultural land and landscape conservation are ensured by the requirement to comply with Good Farming Practice regulations in order to receive payments under the LFAs; meanwhile in Natura 2000 areas, even more robust environmental requirements apply (later hay making). 43 On the basis of data of the Lithuanian Rural Development Plan The Ministry of Agriculture of the Republic of Lithuania Report on the Implementation of the Lithuanian Rural Development Plan in 2007,, May 2008, p

78 Implementation of the Measure Overall, specific, and operational objectives planned in the description of the RDP measure were related to planned outcomes, results, and impact. Operational and specific objectives of the measure were assigned quantitative indicators. The table below provides the level of measure output and result indicator implementation. Table Achievement of indicators pertaining to the Measure Less-favoured areas and areas with environmental restrictions Indicators Measurement unit Planned Implemented Percentage of implementation Output indicators Number of supported farmers operating in thousand % HDAs The supported area of HDAs Number of supported farmers operating in LDAs The supported area of LDAs Number of farmers applying environmental restrictions in Natura 2000 territories selected for protection of birds Result indicators Number of farmers complying with Good Farming ha (the total area of HDAs in Lithuania) % * (of the total area of HDAs in Lithuania) thousand % ha (the total area of LDAs in Lithuania) %* (of the total area of LDAs in Lithuania) thousand % thousand % Practice regulations * Area indicators for LFAs planned in the RDP were exceeded each year: in 2004, it was planned to support 606,900 ha (implementation resulted in 951,975 ha), in ,000 ha (implementation 991,203 ha), in ,100 ha (implementation 1,060,855 ha). Source: The Ministry of Agriculture of the Republic of Lithuania. Report on the Implementation of the Lithuanian Rural Development Plan in 2007, May 2008 Analyzing achievement of output and result indicators, the measure may be evaluated positively, although not all indicators were achieved. On the basis of evaluation by representatives of responsible authorities, the measure received great interest among farmers. Implementation of the measure in respect of time was rather stable, i.e. approx. 110 thousand of applicants received aid every year (with the exception of 2007), and meanwhile the total supported area exceeded 1 million ha. With reference to data supplied under the Table , the forecasted indicators regarding the number of beneficiaries and supported area were exceeded in all years (by approximately one-anda-half times). 78

79 Table Achievement of output indicators by years Indicato rs Forecast Factual Forecast Factual Forecast Factual Forecast Factual Number of 62,360 60, ,177 65, ,155 70, ,700 - beneficia 115,825* ries Supporte 606, , , , ,100 1,060,855 - d area, ha * - total indicators Source: The Ministry of Agriculture of the Republic of Lithuania. Report on the Implementation of the Lithuanian Rural Development Plan in 2007, May ,430 1,014,567* The planned indicators pertaining to the number of beneficiaries under LFAs were achieved and even exceeded: the indicator of supported farmers operating in HDAs was achieved by 98%; meanwhile the indicator of supported farmers operating in LDAs was achieved by as many as 207%. The supported area was also exceeded in comparison to the plan, i.e. in 2004 the excess amounted to 56%, in %, in %. The total area amounted to 1,014.6 thousands of ha. Evaluating this in the general context of Lithuania, the area supported under this measure amounted to 69% of the total area in Lithuania attributed to less-favoured areas, from which 72% were supported as LDAs and 57% as HDAs. Whereas implementation of the measure in Natura 2000 areas is evaluated negatively: only 11% of the planned number of farmers applied for and used the aid. Considering a large number of beneficiaries, the result indicator of the measure was exceeded as well, i.e. the indicator of the number of farmers complying with Good Farming Practice regulations was exceeded as many as 1.5 times. Complying with mandatory aid conditions the Good Farming Practice regulations beneficiaries contributed to sustainable use of agricultural land, conservation of landscape, and improvement of environment. A simple aid granting procedure was one of the key reasons for successful implementation of the measure. This procedure was substantially simplified during the period of the implementation: agricultural entities aiming to receive aid under this measure submitted an application together with the application regarding direct payments for utilized agricultural area and area of field crops. This application was submitted to a subdistrict or another structural division of a municipal administration rather than to regional units of the NPA (as it was the case with other measures). Thus, while declaring utilized agricultural area and area of field crops, an applicant operating in territories attributed to LFAs only had to indicate aiming to receive aid under the RDP measure as well. A simple application submission system resulted in high popularity of the measure. Considering the successful implementation of the measure, this application collection method shall be applied for more RDP measures of compensatory nature during the new period of (refer to Section 7 of the report RDP Administration System ). One of the weaknesses of the measure implementation was a small number of applicants operating in Natura 2000 areas. The design of the Natura 2000 system itself could be named the key reason for failure. Institutions responsible for selection of territories attributable to this system lacked administrative capacity and thus failed with timely identification of these areas. Given the circumstance, the agricultural entities failed to completely understand who was eligible to apply for aid under this measure. Besides, subsequent to identification of the territories, insufficient attention was given to awareness among potential applicants regarding eligible territories, accurate 79

80 submission of applications, and drawing of plans. 45 Additional interviews with representatives of responsible authorities revealed the problem pertaining to the measure implementation: a small payment did not provide for an economic incentive to submit an application. Measure implementation taught yet another lesson: the aid was used not only by subjects living in these areas and engaged in agricultural activity, but also by city residents who regained land and got registered on the Agricultural and Rural Business Register. Considering this lesson, the Rural Development Programme for provides more robust requirements for beneficiaries under this measure: not only that they have to maintain land in good agrarian condition, but also engage in farming. The description of the measure provides an eligibility criterion: an applicant intending to receive aid and in ownership of meadows and natural pastures has to comply with at least one of the following criteria: produce commercial agricultural output; own at least 0.2 livestock units/ha; or land under cultivation has to comprise to 1/3 of the UAA. The planned impact of the measure (the third column of the diagram of intervention logic provides the impact criteria) was not expressed in quantitative terms. Thus, impact analysis of the measure faces difficulty in respect of quantitative evaluation pertaining to implementation of overall objectives of the measure. Still, with reference to good results in the area of output and result indicator achievement, it may be supposed that overall objectives of the measure were implemented as well: a great number of farmers who received aid provides that aid assured a certain level of income to a considerable number of beneficiaries operating in LFAs; the received aid ensured that beneficiaries would continue operating in these areas, which should have contributed to maintenance of the rural population in LFAs and viability of the rural community; compliance with the Good Farming Practice regulations resulted in improvement of environment, balanced utilization of agricultural land, and landscape conservation. Meanwhile, a small number of supported farmers operating in Natura 2000 territories suggest an assumption that the level of assured execution of environmental restrictions in these territories was lower than planned. A more detailed impact of the measure is evaluated in the form of responses to common evaluation questions Analysis of Common Evaluation Questions V.1. To what extent has the scheme contributed to: (i) offsetting the natural handicaps in LFAs in terms of high production costs and low production potential, and: (ii) compensating for costs incurred and income foregone in areas with environmental restrictions? V.1-1. The income deficit due to natural handicaps or environmental restrictions is offset by compensatory allowances or payments. The amount of a compensatory allowance for LFAs was calculated on the basis of the average gross profit difference received while farming in highly/less disadvantaged areas in comparison to the profit gained from favoured areas. Farmers operating in LFAs produce a lower value output per hectare due to limited land productivity or other handicaps. Besides, they face greater expenses while producing crop production, livestock farming or another output. The RDP evaluated that profit from LDAs was on the average 1.6 times lower than from favoured areas, meanwhile profit from HDAs was 2.04 times less. In the mean time, farming in Natura 2000 territories significant for bird protection resulted in expenses that exceed income. Differences of produced output value, expenses, and received profit are supplied in the Table Interview with representatives of responsible authorities 80

81 Table Calculation of a compensatory allowance for LFAs Areas Total Including output, EUR/ha output from crop production, EUR/ha output from livestock farming, EUR/ha other output, EUR/ha Expense s, EUR/ha Including variable fixed Gross profit, EUR/ha HDAs LDAs Favoured areas Source: Ministry of Agriculture of the Republic of Lithuania. Lithuanian Rural Development Plan Considering the difference in profits gained from 1 ha, the amount of payment is calculated: (a) HDAs (b) LDA = 75.3 EUR/ ha = 56.5 EUR/ ha The amount of payment applied to Natura 2000 areas is calculated comparing the profit gained from activities of conventional farming and farming in areas significant for protection of birds. The RDP calculated that conventional farming produces the profit amounting to EUR 55.6 per 1 ha of land, meanwhile farming in Natura 2000 areas significant for protection of birds derives a loss amounting to EUR 33.8 per ha. In order to compensate the lost income, the amount of payment is established: (c) Natura (-33.8) = 89 EUR/ ha On the basis of calculations provided in the RDP, it may be maintained that payments were aimed at compensating the average of 100% of income lost due to greater production costs and reduction in the farm output value. Subsequent to implementation of the measure, it was found that the difference in the gross profit per 1 ha of utilized agricultural area in LFAs reduced from 1.6 to 1.3 times if compared to favoured areas. 46 Thus, it was not compensated by 100%, even though this difference was reduced. It is important to underline that the measure was not only aiming to compensate income lost due to limited land productivity or low production output, but also retain residents in areas with low population. Evaluation (conclusion): the amount of payment anticipated in the RDP was calculated to compensate 100% of income lost due to farming in LFAs or Natura 2000 territories. A large number of beneficiaries participated in the measure, thus income was compensated to the greater number of operators than planned (this is regarded as success of the RDP). Subsequent to implementation of the measure, it was identified that even though the difference in gross profits was not compensated, it was reduced. V.2. To what extent have compensatory allowances helped in ensuring continued agricultural land use? V.2-1. Agricultural land use continued. On the basis of the RDP and rules for administration of the measure, the eligibility criteria also incorporate an obligation to farmers to undertake farming or agricultural activity for a period of no less than 5 years since the first payment received under the 46 Data on agricultural respondents from the presentation Significance of the Lithuanian Rural Development Plan for Agriculture, Ministry of Agriculture, Department for Rural Development, Unit for Coordination of Investment and Compensatory Rural Development Measures, (conference in Birštonas). 81

82 measure. On the basis of this requirement, beneficiaries committed to ensuring an uninterrupted agricultural land use in these areas. With reference to statistics on indicator implementation (refer to Table ), the area of land used in LFAs and Natura 2000 areas increased each year: in 2004, the area amounted to 951,975 ha, in ,203 ha, and in ,060,855 ha. Thus, the declared utilized agricultural area increased by 11.4% during the period This area was larger than planned in the RDP. Here it is stated that it should cover thousand ha in 2004, thousand ha in 2005, and thousand ha in 2006 of the total area attributed to such territories. The table below provides the planned and achieved size of utilized agricultural area in LFAs and Natura 2000 areas. Table Size of UAA planned to be supported and supported under LFAs and Natura Forecast Factual Forecast Factual Forecast Factual Size of supported UAA (ha) A share in the total area of LFAs and Natura % 64% 48% 66% 56% 71% territories (1,495,183 ha in 2004) Source: The Ministry of Agriculture of the Republic of Lithuania. Lithuanian Rural Development Plan of and Report on the Implementation of the Lithuanian Rural Development Plan in 2007, May Considering the increasing area of land, a possibility was discussed to reduce the amount of payment, although subsequent to redistribution of funds between the RDP measures, this measure ended-up with an increase in the amount of aid, thus the amount of payment was not reduced. 47 In the subsequent evaluation of agricultural land-use changes at the level of beneficiaries, data of the survey of beneficiary was used. Evaluating the total area of land, more than two-thirds (68%) of respondents indicated that it has not changed in comparison with the year 2004 or the application submission period; 21% of respondents indicated an increase, meanwhile 11% reported a reduction in the aforementioned area. Respondents elder than 60 years old more frequently stated that the total land area has not changed. Analogically, 17% of respondents indicated that the area of land assigned to LFAs has increased, and 7% of those surveyed replied that the land area has decreased. The least changes in area were observed in areas with environmental restrictions: more than 90% of respondents indicated that area of land of this type has not changed, 2-3% of beneficiaries stated that the land area has increased, and 5% of respondents indicated a decrease. This distribution can be explained by the fact that only three respondents indicated operating in Natura 2000 areas. 47 Interview with representatives of responsible authorities 82

83 Fig Changes in the land area of beneficiaries To what extent has your land area changed in comparison with 2004/time of the application submission? % of respondents supported under Measure 2 of the RDP, n=106 Increased Reduced Has not changed Total land area 21% 11% 68% Land areas ascribed to less favoured areas Land areas ascribed to areas with environmental restrictions 3% 17% 7% 5% 92% 76% Source: TNS Gallup. Report of the Survey of Beneficiaries supported under measures of the RDP Evaluation (conclusion): In summary, the measure has contributed to assurance of the agricultural use of LFAs: beneficiaries were obligated to undertake farming or engage in agricultural activities for a period of no less than 5 years since the first payment received under this measure; in addition, the total declared land area of LFAs increased during implementation of the RDP (by more than 10%). V.3. To what extent have compensatory allowances contributed to the maintenance of a viable rural community? V.3-1. Continued agricultural land use is critical for the maintenance of a viable rural community. Based on interviews with responsible authorities, the measure had a significant impact on maintenance of a viable rural community in LFAs: The aid played a role of a considerable financial support for further farming and continued residence in these territories, It functioned in the form of a safety-catch while aiming to ensure population of the areas, Territories were identified in view of demographic criteria, i.e. density of population and the level of regression. Meanwhile on the basis of statistical data on changes in the rural population it was established that during implementation of the RDP, the rural population regression rate was somewhat disadvantageous to LFAs. LFAs have been assigned areas with the average annual population decline amounting to 0.5% and more. Information of the Department of Statistics on changes in the rural population (Table ) demonstrates that during the period , the population in LFAs dropped by 1.2% on the annual average, meanwhile during the period , regression of population was less and amounted to 0.76%. On the other hand, the average regression of the total rural population during the period of the RDP implementation has increased at even greater extent than in LFAs, i.e. from -0.19% ( ) to -0.52% ( ). In view of these data and overall negative changes in the rural population (emigration and the natural population decline), it can be stated that implementation of the RDP measure had a certain impact on slow-down of the rural population decline in the targeted (LFAs) areas. 83

84 Table Change in the rural population by region during Average in Average in Region Population at the beginning of the year, thousands LFAs* Total 1, , , , , , ,133.4 The average annual change in population, (+,- %) LFAs* Total 0., * calculations were made on the basis of population at the beginning of the year in 19 municipalities that present 76% of the total area of LFAs and 77% of countryside in these areas. According to the survey, the majority (73%) of respondents had a positive attitude toward the impact of the aid in maintaining the viability of the rural community (either an improvement or a significant improvement was indicated). 25% of the interviewed responded that the received aid had no impact on viability of the rural area, although no respondent indicated that the aid caused deterioration in the situation. Evaluating specific aspects on impact of the received aid on viability of the rural community, at least one-third indicated that payments under the measure contributed to retention of rural population and strengthening of the rural community. Approximately one-fifth of respondents believed that payments attracted new investments/business as well as new people. Although on the other hand, as many as 39% of respondents stated that payments made no contribution to viability of the rural community. Fig Impact of the aid on aspects of viability of the rural community Have payments under Measure 2 contributed to: % of respondents supported under Measure 2 of the RDP, n=106 39% 31% 39% 20% 17% 2% maintenance of the size of rural population strengthening of the rural community attraction of new investments/business attraction of new people to rural areas No contribution I don t know Source: TNS Gallup. Report of the Survey of Beneficiaries supported under measures of the RDP In order to evaluate demographic changes in specific supported farms (rather than their opinion on the impact of aid), respondents were provided with questions regarding changes in their families and requested to state whether any family member has abandoned agricultural activity within the last 3 years. More than three-quarters of respondents (79%) indicated that none of their family members have abandoned the agricultural activity. 84

85 Fig Retirement from farming activities among farmer s family members Has any of your family members retired from the agricultural activity in the recent years? % of respondents supported under Measure 2 of the RDP, n=106 Yes 15% No family 6% No 79% Source: TNS Gallup. Report of the Survey of Beneficiaries supported under measures of the RDP % indicated that one or a greater number of family members have abandoned the agricultural activity. They were requested to indicate the family members who abandoned the agricultural activity. Half of respondents indicated children, a little less than one-third (31%) named retirement of their parents, and 13% indicated their spouse. Answers to the question whether family members who abandoned agricultural activity moved from the village/rural settlement, divided respondents into two groups: half of respondents stated that family members who abandoned agricultural activity moved from the village/rural settlement, and the other half maintained that the aforementioned family members stayed living in the village/rural settlement. Evaluation (conclusion): during the period , the average annual regression of rural population in LFAs has increased, although the increase occurred on a smaller scale than the total regression of rural population during the analysed period. Given the fact, it may be argued that implementation of the RDP measure has slowed-down the tendency of decreasing rural population in LFAs and thus contributed to maintenance of viability of LFAs. Still, negative demographic trends persisted; they were demonstrated by the survey data as well: family members of some beneficiaries have abandoned agricultural activity during the period of the RDP implementation and some of them even left their place of residence. V.3-2. Fair standard of living for farmers. Amounts of payments for UAA planned in the RDP were introduced while analysing the question V.1. Based on data from monitoring tables on implementation of the measures, the average amount of aid per farm in LFAs ranged from EUR 518 to EUR 760, depending on the area (LFA or Natura 2000) and the year (available in the table below). Table Average amount of payment under the RDP Measure 2 per farm Region Amount of payment for LFAs (EUR) Amount of payment under Natura 2000 (EUR) Source: Monitoring tables of the National Paying Agency on implementation of the Rural Development Plan (2005, 2006, 2007). 85

86 Survey of participants supported under the measure Less-favoured areas and areas with environmental restrictions demonstrated that the vast majority (82%) found the received payments either important or very important, and only 12% said that the payment received under the measure was not important. The survey regarding the average portion of income comprised from received payments under the measure revealed that in case of as many as 86% of respondents, payments amounted to less than half of their holding income. Only 6% indicated that payments amounted to more than half of the total holding income. Subsequently, payments were not the key source of income to the vast majority of respondents. Fig A share of aid in respect of the total income of beneficiaries What is the average share of the payments received under this measure in the household income? % of respondents supported under Measure 2 of the RDP, n=106 52% 23% 11% 2% 4% 8% Less than 10% 11-25% 26-50% 51-99% 100% I don t know Source: TNS Gallup. Report of the Survey of Beneficiaries supported under measures of the RDP Considering the income structure of holdings in LFAs, beneficiaries were asked about the portion of household income gained from agricultural activity. Almost half of them (46%) indicated that the income derived from agricultural activities amounts to less than 25% of household income. 27% stated that the income from agricultural activities ranges from 26% to 50% of household income. Only 13% of respondents indicated that the household income derived from agricultural activities exceeds 50%. Fig A share of income of beneficiaries derived from agricultural activity 86

87 What is the share of income from the agricultural activity in your household income? % of respondents supported under Measure 2 of the RDP, n=106 46% 27% 4% 9% 13% Less than 25% 26-50% 51-75% % I don't know Source: TNS Gallup. Report of the Survey of Beneficiaries supported under measures of the RDP According to data of the Department of Statistics, income of households in LFAs derived from agricultural activities also represents a relatively small portion, but this portion remained almost stable during the period : a decreasing portion of income derived from agricultural activity within the overall income structure (11.2% in 2004 and 10.5% in 2005) had a slight increase again (12.1% in 2006). The decreasing income from hired labour or personal business (48.4% and 5.2% in 2004 and 47.7% and 4.9% in 2005) has stabilized in A comparative part of income from personal business is increasing in the overall income structure: from 4.9% in 2005 to 6% in An increasing share of social benefits (29.7% in 2004 and 32.2% in 2005) started declining in 2006 and amounted to 31.3%. 48 Fig Structure of household budgets in less-favoured areas (on the basis of the example of Utena County) Income structure ,4 11,2 5,2 29,7 47,7 10,5 4,9 32,2 46,7 6, ,1 31,3 Employed work Individual business Agriculture Social payments 48 The Ministry of Agriculture of the Republic of Lithuania. Report on the Implementation of the Lithuanian Rural Development Plan in 2007, May 2008, p

88 Source: Household budgets in 2004, 2005, and V.: The Department of Statistics under the Government of the Republic of Lithuania. Beneficiaries were also requested to evaluate their income in comparison to residents living in the same area although engaged in other than agricultural activity. 40% believe that their income is lower and 21% find that their income is higher compared with the residents living in the same area although engaged in other than agricultural activity. Fig Comparison of income received from agricultural and other activities Your income in comparison with the income of population living in the same area and engaged in other activity than agriculture % of respondents supported under Measure 2 of the RDP, n=106 40% 40% 21% Higher Lower I don't know Source: TNS Gallup. Report of the Survey of Beneficiaries supported under measures of the RDP Evaluation (conclusion): In summary, household income derived from agricultural activities in LFAs is relatively modest (a little more than one-tenth of income). The survey data confirms the overall statistical LFA indicators, i.e. almost half of income of beneficiaries derived from agricultural activities amounts to less than 25% of total household income. Given the fact, payments under this measure (which on the average ranged from EUR 518 to EUR 760 and were designed to compensate for lost income from agricultural activities), also comprised a small share of income (in case of more than half of respondent as little as up to 10% of total income). V.4.A. To what extent has the scheme contributed to the protection of the environment by maintaining or promoting sustainable farming that takes account of environmental protection requirements in LFAs? V.4.A-1. Maintenance/promotion of sustainable farming. Implementation of the measures contributed not only to assurance of income of agricultural operators and maintenance of viability of rural communities, but also to improvement of environment and assurance of sustainable farming. These objectives were pursued by incorporating a commitment to comply with Good Farming Practice into eligibility criteria applicable to applicants. 49 These requirements provide a succinct description of mandatory and recommended measures for management of agricultural production. This is an optimal farming system that assures a sustainable economic development of a farm. These requirement set out guidelines for a sustainable and an environmentally friendly 49 Good Farming Practice requirements approved by the Minister of Agriculture of the Republic of Lithuania on 16 July 2004, Order No. 3D

89 agricultural management system: they provide requirements for embankments of surface water basins; set out the ceiling for livestock density (livestock density on a farm must not exceed 1.7 livestock units per hectare of utilised agricultural area); restrictions for use of plant protection products; requirements for constructions (installation of livestock manure storage facilities) and soil conditioning (a period established for permitted fertilization of fields with solid dung and liquid manure). Considering the requirement, all supported agricultural entities operating in LFAs have contributed to assurance of sustainable farming. It may be said that depending on the size of supported utilized agricultural area, the measure had a solid impact in assurance of sustainable farming, i.e. Good Farming Practice requirements were applied to 1,014.6 thousand ha. On the national scale, this figure amounted to 69% of the total area in Lithuania attributed to less-favoured areas. Still, during the survey, more than half (59%) of beneficiaries said that they would have complied with these requirements irrespective of aid. Almost twice smaller number of respondents (30%) indicated that they would have not complied with these regulations. Considering the fact, the measure had a lower impact on assurance of sustainable farming. Fig Input of the aid in assuring compliance with Good Farming Practice requirements If not for the aid, would you still have complied with the Good Farming Practice regulations? % of respondents supported under Measure 2 of the RDP, n=106 Yes No I don't know 59% 30% 10% Source: TNS Gallup. Report of the Survey of Beneficiaries supported under measures of the RDP According to the survey, 66% of respondents stated that the aid improved the environmental protection, 32% believed that the situation remained unchanged, although none of respondents chose an answer stating that the aid had deteriorated the situation. Still, to the question on special action taken to improve environmental protection, more than half of respondents (58%) said that no special action was taken. Fig Impact of the aid on environmental protection Have you taken any special actions to improve the environmental protection since the aid? % of respondents supported under Measure 2 of the RDP, n=106 Yes 42% No 58% 89

90 Source: TNS Gallup. Report of the Survey of Beneficiaries supported under measures of the RDP Beneficiaries who indicated taking special action for improvement of environmental protection were asked to indicate specific actions taken. More than half of respondents (53%) said that they reduced the use of nitrates and 42% indicated reducing the use of pesticides. More than one-third of respondents (38%) engaged in organic farming, meanwhile 27% or respondents indicated reducing the number of livestock per one hectare. Fig Actions taken by beneficiaries for improvement of environmental protection What actions have you taken? % of respondents supported under Measure 2 of the RDP and who have taken special actions since the support provision (to improve the environmental protection), n=45 Reduction of the use of nitrates 53% Reduction of the use of pesticides 42% Organic farming 38% Reduction of a number of livestock per ha 27% Other 20% Source: TNS Gallup. Report of the Survey of Beneficiaries supported under measures of the RDP Evaluation (conclusion): the measure had a significant contribution to maintenance of sustainable farming and in some cases promoted application of environment protection requirements: all supported operators operating in LFAs were complying with Good Farming Practice regulations. Subsequent to implementation of the measure, thousand of farmers complied with Good Farming Practice regulations, which is 1.5 times more than planned. One-third of surveyed beneficiaries maintained that it was the possibility to receive aid that encouraged them to apply environmentally friendly farming practice. V.4. B. To what extent has the scheme contributed to the protection of the environment by increasing the implementation and respect of environmental restrictions based on Community environmental protection rules? V.4.B-1. Increased implementation and respect of targeted environmental protection restrictions limiting agricultural use. The RDP planned providing aid to areas with environmental restrictions these areas are attributed to Natura 2000 territories. More robust farming restrictions are applied to Natura 2000 areas than requirements set out in the Good Farming Practice regulations. On the basis of the RDP, the following environmental protection requirements/restrictions were applicable to agricultural land in Natura 2000 areas selected for protection of birds: (1) it is prohibited to change the designated land purpose; (2) it is prohibited to plough meadows and natural pastures; (3) it is prohibited to change the hydrological regime if this would cause a deterioration in the condition of the area; (4) afforestation of the land is prohibited ; (5) it is prohibited to make hay until 15 August. As it was mentioned in analysis of output indicator of the measure, this part of the measure (related to Natura 2000 areas) was not implemented as successfully as support to LFAs. Implementation of the measure faced systematic problems as well as insufficient capacity and low level of awareness among potential beneficiaries. Considering the fact, impact of this part of the measure had little 90

91 significance. During the period of the RDP design, the territory amounting to 30 thousand ha was identified as potentially supported area. Provision of aid to farmers operating in areas with environmental restrictions commenced only in 2005, thus monitoring tables of 2005 do not provide information of the number of supported agricultural holdings. According to data of 2006, the aid was provided to 407 agricultural holdings in these areas and in 2007 to 119. The total supported area amounted to approx. 3 thousand ha. Considering the planned indicator regarding beneficiaries, the number of supported farmers amounts to only 11%. Meanwhile, the supported area amounted to only 10% of the area of territories identified in Evaluation (conclusion): A part of the RDP measure was aimed at implementation of targeted environmental protection restrictions: the RDP planned to provide compensations to farmers operating in Natura 2000 territories and engaging in the method of farming dedicated to protection of birds. Still, the measure had little impact on conformity to these targeted environment protection restrictions due to small number of applicants: the aid under the measure was received by only 11% of the planned number of farmers and the area in which the conformity to aforementioned environmental protection requirements was assured amounted to as little as 10% of areas attributed to these territories in Agri-environment The RDP measure Agri-environment has contributed to implementation of the third overall objective, i.e. environmental improvement. Besides, this measure had to contribute to implementation of the second overall objective, i.e. increasing income of farmers. The measure is of compensatory nature. In the area of agricultural activity, implementation of environmental protection commitments is most frequently related to loss of income and/or additional costs. Thus, engagement in environmentally friendly farming methods involving more than just the usual good farming practice as well as implementation of measures that protect the rural landscape and biodiversity requires motivation, i.e. compensation for the entire or at least a part of lost income, providing compensatory allowances for the entire period of income reduction. The measure Agri-environment consisted of 4 schemes: (1) Protection shore belts of surface water bodies in meadows and in arable land and prevention of soil erosion; (2) Landscape Stewardship Scheme; (3) Organic Farming Scheme; (4) Rare Breeds Scheme. Although applicants could implement one or more schemes of the measure, the compensatory allowances were paid only for implementation of one scheme in the same area (with the exception of the Rare Breeds Scheme). The compensatory scheme was to be chosen by applicants. The measure had overall, specific, and operational objectives planned; these objectives are reflected in the intervention logic (the logical diagram of impacts), which is supplied below Intervention Logic the Measure 91

92 As mentioned, the Agri-Environment measure is a complex one consisting of 4 schemes with its own objectives and types of activities (Figure integrates schemes in columns 2 and 3 of the intervention logic). As it is obvious from the figure below (column 4 of the intervention logic), activity results and impact of these schemes were closely interrelated and determined not only better environment, increase in the production of high quality agricultural products but also higher standard of living, socio-economic welfare. Figure Intervention logic of the measure Agri-Environment Improvement of surface and ground water quality Protection of surface water bodies and prevention of soil erosion Improvement of the environment, e.g. preserved biodiversity, more attractive landscape, better soil quality Environmental and socioeconomic benefits for rural areas Agrarinė aplinkosauga Preservation of landscape Enhancement of organic farming Promotion of organic farming and environment-friendly farming practices Higher awareness and knowledge about environment-friendly farming practices Increase in the production of high quality organic agricultural products and thereby improvement of income and standard of living Preservation of local breeds of animals Protection of rare local endangered breeds on Lithuanian farms Increase in local rare breeds of animals Relevance of the Agri-environment measure and its objectives is substantiated by its role implementing the key objectives of the Lisbon and Göteborg strategies improvement of agrienvironment and increase of employment - and data regarding the scale of ecologically sensitive territories (including land affected by erosion), abundance of natural elements in the agrarian landscape, and the scale of harm inflicted by Soviet land melioration on biodiversity and pollution of surface and ground waters in Lithuania. Implementation of overall objectives pertaining to environmental protection contributes to formation of healthier living environment, creation of natural and cultural landscape elements, and assurance of the overall ecological stability. Aid provided to organic farming promotes its development by introduction of new favourable technologies and design preconditions for creating the greater added value in rural areas to transfer from production of standard to niche products, which in turn would strengthen competitiveness of farms and increase income and employment of farmers. Aid for landscape stewardship helps preserving biodiversity and the landscape typical to Lithuania with spaces of natural components, which amounts to the largest part of the territory. Protective belts in meadows assures protection of waters from pollution and soil erosion 92

93 Implementation of the Measure Overall, specific, and operational objectives planned in the description of the RDP measure were related to achievable outcomes, results and impact of the measure that were assigned quantitative objectives. The data on the achievement of measure output and result indicators, supplied in the Table , allow stating that the measure was successfully implemented: in comparison to the planned indicators, output indicators were achieved, meanwhile the result indicator was exceeded twice. Table Achievement of indicators pertaining to the Measure Agri-environment Indicators Measurement units Planned Implemented Percentage of implementation Output indicators Number of beneficiaries units 3,000 2, Supported area in thousand thousand ha hectares: Result indicators The share of organic UAA in the total UAA used by agricultural output producers % percentage point Source: The Ministry of Agriculture of the Republic of Lithuania. Report on the Implementation of the Lithuanian Rural Development Plan in 2007, May 2008 Data provided in the table above demonstrate that compensatory allowances were paid to almost the entire planned quantity of beneficiaries. As applicants to the Agri-environment measure could be regarded as beneficiaries under two schemes (under the Rare Breads Scheme and one of either Protection shore belts of surface water bodies in meadows and in arable land and prevention of soil erosion or the Landscape Stewardship Scheme or the Organic Farming Scheme), thus the total number of participants under four schemes (3,003) was greater than the number of beneficiaries (2,959) and was slightly greater than the planned number of participants. Although the supported area was more than one-and-a-half times greater than the planned one (94.4 thousand ha instead of 60 thousand ha) as during the period of there was not only a noticeable increase in organic farms but also in their average size, and many large farms engaged in organic farming. This resulted in a twice greater scheme implementation result indicator the share of the area attributed to organic farming in the total UAA used by agricultural product producers: instead of the planned increase amounting to no more than 2%, the increase amounted to 4.7%. As it was mentioned under Section 4.2, the increase in the need for funds committed to compensatory allowances under the Agri-environment measure was first of all conditioned by its popularity among organic farmers who were well informed and had experience gained applying for direct aid in Lithuania under organic farming programmes funded by Tatula fondas, the Rural Development Fund (since 1997), and the Special Rural Support Programme (since 2001). Just as it was planned, much greater compensatory allowances for organic areas paid under the RDP for (in comparison to those paid before 2004) promoted a rapid growth of the number of organic farms and certified areas. Just as planned, the scale of the measure implementation in respect of time was gradually increasing (refer to Table ). During the first and the second year of the measure implementation, 93

94 compensatory allowances were paid to a much greater number of beneficiaries than planned, although the supported area exceeded the planned area only in The panned number of applicants was achieved in 2007, although the forecasted indicator of the supported area was exceeded rather noticeably (57%). Table Achievement of output indicators by years Indicators Forecast Factual Forecast Factual Forecast Factual Forecast Factual Number of beneficiaries * 2 225* 3.000* 2.675* 3.000* 2959* Supported area, ha * * * * * * * total indicators Source: The Ministry of Agriculture of the Republic of Lithuania. Report on the Implementation of the Lithuanian Rural Development Plan in 2007, May 2008 Although aid under the Agri-environment measure was provided only under four schemes (refer to the Diagram ), the majority of applicants (more than three-quarters) participated in the Organic Farming Scheme. 98.5% of the total funds were committed to this scheme (Table ). A comparatively high level of compensatory allowances under the organic farming scheme was one of determinants that promoted a rapid development of organic farming in Lithuania: over four years of the RDP implementation, the number of farms engaged in organic farming increased by more than 4 times (from 700 in 2003 to 2,855 in 2007), meanwhile the certified area increased by more than 5 times (from 23.3 to thousand ha respectively). The average size of an organic farm increased by 32% (from 33.3 to 43.9 ha respectively). This farming method was not only regarded as a preventive environmental protection measure but also helped resolving issues regarding employment of rural population, competitiveness of agricultural products, and additional income (more information is provided in the Section 5.3.3). One of the weaknesses of implementation of the Organic Farming Scheme: although comparatively high level of compensatory allowance per hectare was aimed at designing preconditions for organic farming on the basis of the state-of-the-art technologies as well as further development and increase of the output of organic products, the reality demonstrated that a share of organic farmers were interested in comparatively large payments as production and sale under the given low yield was simply not worth the trouble. On the other hand, it should be noted that this lesson was taken into consideration for the Organic Farming Programme for , which includes a requirement for partial sale/use of products supplied to the market as an eligibility criterion for the aid 50. Evaluating the development of organic farming, it was noticed that in the period of two last years it was more and more encouraged by interest of consumers in organic foodstuffs and, respectively, increasing demand in organic raw products, which resulted from increase in the number of businesses producing organic foodstuffs. Over the period of the programme implementation, there was an increase in the number of businesses involved in production of organic products. In 2007, 26 organic product production companies were certified (18 companies in 2003) 51. In 2007, there was a substantial increase in the assortment of organic foodstuffs. Meanwhile, over the first two years of 50 Measures of the Rural Development Plan for for Lithuania. The Ministry of Agriculture of the Republic of Lithuania, EUROSTAT data base Agriculture, forestry and fisheries: Organic farming (Last update: Tue Oct 07 15:10:21 MEST 2008) 94

95 the programme implementation, development of organic farming was more promoted by compensatory allowances. Table Distribution of beneficiaries and aid under the Measure Agri-environment depending on a scheme for Number in Percent units, area in thousand ha % Amount of public spending in million EUR The total number of beneficiaries of the measure, units 2,959* x x x The total depending on applicants participating in schemes 3,003* Including the total depending on a scheme: Protection shore belts of surface water bodies in meadows and in arable land and prevention of soil erosion Landscape Stewardship Scheme Organic Farming Scheme 2, Rare Breeds Scheme Supported area, thousand ha, including area depending on a scheme: x x Protection shore belts of surface water bodies in meadows and in arable land and prevention of soil erosion x x Landscape Stewardship Scheme x x Organic Farming Scheme x x * the difference appeared because a certain share of applicants received aid under two schemes, i.e. those participating in the Rare Breeds Scheme also received aid under one of the other remaining three schemes. Source: The Ministry of Agriculture of the Republic of Lithuania. Report on the Implementation of the Lithuanian Rural Development Plan in 2007, May The Rare Breeds Scheme has raised a somewhat extensive interest among applicants and according to the number of applicants was the second most popular scheme. Farmers engaged in production of local domestic livestock and poultry and participating the Rare Breeds Scheme, submitted 521 applications for aid over the period of (applications were not accepted during 2007). In 2007, the number of beneficiaries amounted to 337; meanwhile over the period , this figure amounted to 363 farmers engaged in production of livestock and poultry. In 2007 in comparison to 2006 the number of beneficiaries reduced due to failure to deliver obligations. The reduction in the number of beneficiaries was related to the fact that a share of 95

96 applicants had excessively optimistic plans in relation to the increase in the number of livestock and poultry, which could not be achieved due to low reproduction and death of animals. Besides, in 2007, the number of livestock and birds under the supported rare breeds scheme reduced due to increase in prices of resources required for livestock and poultry keeping, thus, payments made for all kinds of breeds became comparatively too little. The Landscape Stewardship Scheme has received a similar level of attention (Table ). During the period , 11% of the total number of applicants participating in the measure Agri-environment participated in the aforementioned scheme (the number of applicants amounted to 343). Over the period , the scheme was implemented in the land area amounting to 3,123 ha. These areas include wetlands and meadows. It should be underlined that only small areas were handled under the Landscape Stewardship Scheme. This could have been caused by the following: handling of wetlands required geodetic measurements that are time consuming and somewhat expensive; some common requirements of the scheme were not completely suitable to specific territories of Lithuania, e.g. the Rusnė Island 52 ; it was a novel measure in Lithuania, thus interest among farmers in the scheme was low as differently than in case of the Organic Farming Scheme Lithuania had no good practice in the area of implementation of such projects. As per survey 53, the majority of Lithuanian arable farmers are conservative and undertake new activities only subsequent to assessment of their benefits on the basis of success stories. During the course of the scheme, potential applicants received primary information regarding the contemporary attitude on protection of rural landscape and biodiversity, identified potential protected natural objects within their holdings, and were introduced to possibilities of combining environmental improvement measures with earning income for such activities. Applications regarding participation in the Scheme for Protection shore belts of surface water bodies in meadows and in arable land and prevention of soil erosion were submitted by 14 farmers. Payments were authorized for 6 applicants for the area amounting to 3.3 ha (Table ). The following reasons were identified for low interest of beneficiaries in the scheme: a certain share of farmers had an inadequate minimal area of protection belts established as they were somewhat narrow alongside trenches and streams, meanwhile wider belts alongside larger rivers were covered with shrubbery or forest; hay making machinery was impossible to use for mowing slopes of trenches and other water bodies and work conditions without the machinery are difficult 54 ; low interest of farmers in the scheme as this measure was novel in Lithuania and farmers were lacking good practice examples in the area of implementation of such projects Analysis of Common Evaluation Questions 52 The Ministry of Agriculture of the Republic of Lithuania. Report on the Implementation of the Lithuanian Rural Development Plan in 2007, May 2008, p To research distribution of poverty among arable farmers and identify measures for poverty reduction and prevention. Report on a study commissioned by the MoA. The project manager Mrs. Vitunskienė. Lithuanian University of Agriculture, The Ministry of Agriculture of the Republic of Lithuania. Report on the Implementation of the Lithuanian Rural Development Plan in 2007, May 2008, p

97 VI.1.A. To what extent have natural resources been protected in terms of soil quality, as influenced by agri-environmental measures? VI.1.A-1. Soil erosion has been reduced. In accordance with the opinion of more than half of respondents (52%) supported under the RDP measure Agri-environment, the soil erosion was reduced subsequent to commencement of the scheme implementation. 23% maintained that soil erosion was not reduced since commencement of the scheme implementation; meanwhile 25% could not provide a response to the question. Fig Impact of the aid on soil erosion Has the soil erosion been reduced since the start of the scheme implementation? % of respondents supported under Measure 3 of the RDP, n=57 Yes 52% No 23% I don't know 25% Source: TNS Gallup. Report of the Survey of Beneficiaries supported under measures of the RDP Beneficiaries who stated that soil erosion was reduced subsequent to commencement of the scheme implementation also indicated the causes of such result (Figure ). The majority of beneficiaries indicated that the soil erosion reduced due to changed agricultural activity (reduction in soil cultivation, ploughing, etc.) and 33% mentioned the land use (natural pastures, meadows). There were less respondents (17% in each case) stating that soil erosion reduced due to installation of barriers (protection belts and etc.) as well as reduced livestock density. Fig Measures reducing soil erosion Measures which have contributed to the reduction of soil erosion % of respondents supported under Measure 3 of the RDP and who stated that the soil erosion had been reduced, n=30 Because of a changed agricultural activity (reduced soil cultivation, ploughing, etc.) 53% Because of the land use (pastures, meadows) 33% Because of the installation of handicaps (protection belts, etc.) Because of a reduced livestock density 17% 17% Other 7% Source: TNS Gallup. Report of the Survey of Beneficiaries supported under measures of the RDP

98 Only one-fifth of respondents who maintained that soil erosion was reduced also indicated that the soil erosion reduction was the key objective of their EU supported actions. In accordance with the remaining four-quarters of respondents, the soil erosion reduction was not the key objective of supported actions. Fig A share of supported actions aimed at soil erosion control Was the reduction of soil erosion the key objective of the supported actions? % of respondents supported under Measure 3 of the RDP and who stated that the soil erosion had been reduced, n=30 Yes 20% No 80% Source: TNS Gallup. Report of the Survey of Beneficiaries supported under measures of the RDP Evaluation (conclusion): having in mind a somewhat large area amounting to thousand ha, to which agri-environment measures were applied (this is the area for which compensatory allowances were paid during the period (see Table ), it amounted to 3.5% of utilized agricultural area used by agricultural producers) and considering results of the survey of beneficiaries (more than half of them reported the reduction in soil erosion due to implemented agri-environment measures), it is possible to maintain that the measure was significant in creating conditions for environmentally friendly use of land resources in agriculture. VI.1.A-2. Chemical contamination of soils has been prevented or reduced. In order to identify the level of contribution achieved by implementation of the measure to reduction of chemical contamination of soils, beneficiaries were inquired about the change in the use of chemical plant protection products and mineral fertilisers during the period of aid, and the type of mineral fertilisers used prior to participation in the scheme. In accordance with the majority (54%) of beneficiaries the implementation of the schemes resulted in reduction of the use of chemical plant protection products. A little less (42%) believed that participation in the scheme had no impact on the use of chemical plant protection products. The majority (76.6%, cf. table ) received aid under the Organic Farming Scheme (70% of respondents supported under the RDP measure indicated their participation in this aid scheme), which is probably the reason why the majority of them did not use chemical plant protection products prior to participation in the scheme either. Fig Change in the use of chemical plant protection products 98