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1 SUMMARY The National Rural Development Strategy for as well as the Lithuanian Rural Development Programme for (hereinafter the Programme ) drafted for the implementation of the Strategy have been drawn up following the provisions of Council Regulation (EC) No 1698/2005. The Programme was approved on by decision No C(2007)5076 of the European Commission of 19 October Its overall objective is to ensure economic growth by improving competitiveness of agricultural, food and forestry sectors, creating opportunities for diversification of economic activities and improving the quality of life in rural areas. To achieve this objective, the Programme distinguishes four priority investment axes and 27 measures aimed at increasing competitiveness of agricultural, food and forestry sectors (Axis 1), improving the environment and the countryside (Axis 2), enhancing quality of life and diversifying economic activities in rural areas (Axis 3) and implementing the LEADER approach (Axis 4). In addition, some of the funds have been used for fulfilling continuing obligations under the RDP Subject to the requirements of the said Council Regulation, a team of ten experts conducted a midterm Programme evaluation in April December The objective of the mid-term evaluation was to examine the progress of the Programme, achievement of the objectives, socio-economic effects and impact on the implementation of the Community priorities. Considering absorption of the assistance and implementation of the measures, the mid-term evaluation was more focused on continuing relevance and efficiency of the assistance, while in case of measures that absorbed most of the assistance during the reporting period (in particular, Axes 1 and 2), a more detailed analysis of effectiveness and impact was carried out. The assessment of relevance of the Programme started with examination of socio-economic, political and environmental changes in and their impact on the Programme implementation as well as measurement of the impact of the Programme on changes in rural development trends. The most important exogenous factor negatively effecting the implementation and results of the Programme was the economic crisis. The year 2009 felt the consequences of it: compared to the previous year, buying-in prices for agricultural products slumped by 22%, the gross value added created in the agricultural sector decreased by 21%, investment processes went down as well as the number of the employed in other than the agricultural sector. The economic decline emphasised the relevance of the Programme intervention logic even more as the recession made many problems to be addressed more pressing (e.g. low value added of agricultural products, small and insufficiently modern farms, a lack of organisational and entrepreneurship capacities, small and little competitive forests, low competitiveness of agricultural products in international markets, low employment in rural areas, poor opportunities to develop non-agricultural activities, shortage of capacities and local initiatives). Changing general economic and social trends highly affected the implementation of measures of Axis 3 as potential applicants had considerably lower opportunities to lend from credit institutions the missing money for the project implementation and financial engineering measures were not applicable in this Axis. Changes in the socio-economic situation also effected financial effectiveness of the Programme. EUR billion was allocated to the Programme implementation in , and over EUR 500 million, i.e. 22% of the total amount foreseen for the whole programming period, was disbursed in the reporting period. Axes 1 and 2, especially measures Modernisation of agricultural holdings, Payments to farmers in areas with handicaps, other than mountain areas, Agrienvironment payments and Setting up of young farmers, absorbed the assistance the best, while measures of Axis 3 used the least funds since only 0.2% of the total amount foreseen for the whole programming period had been disbursed in No funds were disbursed under measures Involvement in the food quality schemes, Village renewal and development, Implementation
2 of local development strategies, Inter-territorial and transnational cooperation in the reporting period. Table 1. Absorption of the Programme funds by axes Programme axis Assistance allocated in , thou. EUR No of applications received in No of agreements signed (authorised applications) in Assistance disbursed in , thou. EUR Share of the assistance allocated in , % Axis 1 950, ,247 8, , % Axis 2 824, , , , % Axis 3 280, % Axis 4 136, , % Technical assistance 92, , % Total: 2,285, , , , % To ensure absorption of the assistance, in the period of financial resources were reallocated as due to lower popularity of some measures, weaker capacities to absorb assistance under new-type actions, competition among Programme measures as well as between certain Programme measures and direct payments, there was a risk to absorption of assistance under certain measures. Five reallocations among measures (EUR million, i.e. 2% of the Programme funds, was reallocated) in the reporting period increased financing for Vocational training and information actions, Setting up of young farmers, Modernisation of agricultural holdings, Processing of agricultural products and increasing of added value, Village renewal and development, Involvement in the food quality schemes, while assistance to measures Early retirement, Use of advisory services, Diversification of non-agricultural activities, Support for business creation and development, Encouragement of rural tourism activities was reduced. It should be mentioned that smaller financial interventions also weakened the impact of the Programme on solution of certain rural development issues (e.g. related to development of nonagricultural activities in rural areas). Having evaluated the quality and efficiency of the Programme s administration and management framework, it may be stated that the previous rural development programmes served as a basis for creation of a proper Programme s administration and management framework where functions are clearly defined and distributed among institutions administrating the Programme and their divisions. The system also allows involving other stakeholders into this process. Moreover, applicants are of high opinion about the Programme s administration system, too. 76% of the respondents have rated it as good. The Programme administration and management procedures hardly different from those of the previous periods, therefore it allows increasing efficiency of administration (available necessary capacities, experience, more effective preparation for dealing with problems). On the other hand, there are certain systemic shortages that were identified in the previous periods as well (incompliance with the terms established by legislation for application evaluation, improper operation of the Programme s monitoring system). The Programme s administration quality was improved by such factors as simplified rules for implementation of certain measures of Axes 1 and 3, an exhaustive list of activities supported and not supported under measures of Axis 3, establishment of the Loan Fund and the proper integration of new forms of assistance (financial engineering), installation of e-declaration system enabling to apply for direct payments for utilised agricultural areas and crops, active raising awareness about assistance opportunities and the good practice, promotion of vertical and horizontal partnership, establishment of effective conditions for the provision of assistance (relevance criteria), focus on risk management. Besides, authorities administrating the Programme also did their best to deal with the problems faced during the Programme implementation and to improve the administration system: in the reporting period six packages of amendments to the Programme were submitted to
3 the European Commission (five in and one in 2010), five of which have already been approved. Evaluation of effectiveness and impact of the Programme implementation started with analysis of 27 measures, examining their intervention logic, achievement of monitoring indicators and financial implementation as well as answering measure-level evaluation questions. Later on, the results of the analysis of measures were aggregated into the Programme level to determine the gross effect of the Programme. Impact of the Programme was evaluated against seven impact indicators recommended by the European Commission: economic growth, employment creation, labour productivity, reversing biodiversity decline, change in high nature value farmland and forestry, change in nutrient balances and increase in production of renewable energy (the table below presents evaluation results by key indicator). It is important to note that the evaluation determined a low deadweight effect. It was approx. 12% on average in investment measures, hence the gross effect of the Programme is little different from the net effect. Table 2. Gross effect of the Programme Indicator Target in Socio-economic impact indicators Economic Agricultural and 2,300,000 growth forestry sectors PPS Employment creation Labour productivity Impact of the Programme in In , the GVA created by Programme interventions in the agricultural and forestry sectors and expressed in the Purchasing Power Standard (PPS) amounted to million. The analysis of data of 2009 shows that the Programme has contributed to the economic growth in agriculture by 8.5%. Compared to the target level, the Programme s progress is considerable, the quantitative target level set, however, is not adequate to investments. Food sector 330,800 PPS In , the GVA created by the Programme implementation in the food sector amounted to million PPS. The analysis of data of 2009 reveals that the additional GVA created by Programme interventions accounted for 3.9% of the gross value added created in the food sector that year. It should be mentioned that the quantitative target level set is also not adequate to the scope of intervention. Non-agricultural sector Non-agricultural sector Agricultural, forestry and food sectors Agricultural and forestry sectors 4 5% In , around EUR 3 million of the assistance was absorbed under measures of Axes 3 and 4. In the reporting period, the Programme had no statistically significant impact on economic growth in the non-agricultural sector. 5 7% In , measures of Axes 3 and 4 created 13 jobs: 9 jobs were created under measure Support for business creation and development, 3 jobs under Diversification of non-agricultural activities and 1 job under Encouragement of rural tourism activities. In the reporting period, the Programme had no impact on employment growth in the non-agricultural sector. - In , Programme interventions created or preserved 670 jobs in the agricultural and forestry sectors and 427 jobs in the food sector. It should be noted that calculations made using the econometric modelling included only the shift in the number of employed persons as the impact of the Programme on the number of farmers and their family members cannot be measured due to the specific data collection. Taking into consideration the fact that certain measures create jobs mostly for individual farmers or their family members, the impact of the Programme on job creation is even greater. 1) EUR 9,400/ AWU (agriculture); 2) EUR 15,600 /AWU (forestry) The Programme increased labour productivity in the agricultural and forestry sectors by EUR 21/AWU in 2007, EUR 122/AWU in 2008 and EUR 549/AWU in The analysis of the labour productivity data of 2009 reveals that the impact created by the Programme constitutes 8.5% of the total indicator of the country. Since the total labour productivity in the sector declined in 2009, Programme interventions (in particular under the measure Modernisation of agricultural holdings ) mitigated negative tendencies of the decline.
4 Indicator Target in Food sector EUR 10,100 /AWU Environmental impact indicators Reversing biodiversity decline Halted biodiversity declining Change in high nature value farmland and forestry Change in nutrient balances Increase in production of renewable energy Six target values for different measures 1 Maintaining positive changes Production of renewable energy from wood, wood waste and wood raw material 8% or 850 oil equivalent units Impact of the Programme in The Programme increased labour productivity in the food sector by EUR 9/AWU in 2007, EUR 223/AWU in 2008 and EUR 969/AWU in The impact created by the Programme accounts for 3.9% of the total indicator of labour productivity in the food sector. The measure Processing of agricultural products and increasing of added value had the greatest impact. The Programme supported 90,683 ha of land (7.3% of the total area directly aims at contributing to the preservation of biodiversity. The Programme was conducive to reversing biodiversity decline. The greatest impact was demonstrated by the measure Agri-environment payments and its schemes Landscape Stewardship Scheme and Organic Farming Scheme. However, this impact is small at the national level (considering both the quantitative target level set in the Programme and the total area of the country, the assistance covered 1.4% of the total area of the country). Programme measures supported actions in type 2 and type 3 high nature value farmlands, i.e. areas where high nature value farming practice is applied and areas supporting rare species. HNV practice was used in utilised agricultural areas covering 59,420 ha (3% of the total HNV utilised agricultural area) and in forests covering 3,214 ha (0.5% of the total area of HNV forests). The Programme supported 27,172 ha of the protected natural territories (1% of the protected natural and HNV forest areas), and had a positive impact on the HNV land. This impact, however, is rather low at the national level, possibly due to its low scope. The Programme supported 83,177 ha of the area (6.7% of the total area directly aims at contributing to the improvement of water and soil quality. The Programme had a positive impact on the improvement of water quality, although this impact was rather small at the national level (1.2% of the total area of the country). The changes in nutrient balances were mostly determined by actions (14,734 beneficiaries) related to the intention to reduce water pollution by organic matters, limit the use of fertilisers and pesticides, and promote afforestation, thus preventing agricultural activities, fertilisation and erosion. The Programme supported 25,151 ha of the area (2% of the total area directly aims at contributing to combating climate change. The Programme has created the opportunity to mitigate climate changes in future, however the impact has not emerged yet (limited progress in implementation of forestry measures; the effect of forestry measures is visible in the long run). The important fact is that the quantitative target level set in the Programme was almost achieved in the reporting period even without the input of the Programme as in 2009 the production of renewable energy from wood raw material amounted to 820 oil equivalent units. Given it, it is recommended to set a more ambitions quantitative target level for the impact indicator. Assistance under the Programme directly or indirectly contributed to the increase in and maintenance of income, while the greatest impact was made by measures of Axes 1 and 2. Thus, for instance, in compensation payments under the measures Payments to farmers in areas with handicaps, other than mountain areas (less favoured areas) comprised 18% of the total annual farming revenues. The income of rural inhabitants was also affected by measures Early retirement 1 1) UAA make up 50% of the high nature value areas; 2) 50% increase in the properly managed UAA in high nature value areas; 3) High nature value forests cover 4,000 thou ha or 31.5%; 4) High nature value forests cover 1 thou ha, i.e. 9.5% of the total forest area; 5) High nature value forest area increases by 4,000 ha; 6) High nature value forest area increases by 4,000 ha or 31.5%.
5 and Setting up of young farmers. It should be noted that in case of investment measures, income increased later as at first beneficiaries had to invest their own funds into the project implementation. The impact of the Programme on the quality of products and implementation of innovation was low at the national level, with the exception of the Organic Farming Scheme under the measure Agrienvironment payments, as the assistance expanded the area of certified organic farms by 40%. On the other hand, the majority (around 70%) of all certified organic areas were cereals and legume crops, while organic farming of other crops has little progressed. The farm restructuring process hardly changed as the number of small farms reduced only by 2.6% during the first three years of the Programme implementation (in 2009, small farms made up 76% of all farms with declared land). Farm consolidation was supported under measures Setting up of young farmers, Early retirement and Semi-substance farming. Nevertheless, bigger farms with better administrative capacities probably had more chances to receive assistance. The Programme had a positive impact on the number and structure of rural inhabitants as well as on the improvement of viability of rural communities. This impact, however, was rather small at the national level. At the moment, the majority of Lithuanian farmers are elder people, hence the measures focused on enhancement of the human potential in the agricultural sector are still very relevant. The Programme, directly or through the farming limitations set, was conducive to improvement of the environment, while the total area supported by Axis 2 amounted to 1.23 million ha in The Programme implementation aimed at improving the quality of life and diversifying economic activities in rural areas by increasing employment opportunities to and income of rural inhabitants, creating the environment attractive to living and working, increasing the number of microenterprises and rural tourism facilities, etc. The impact of the Programme in the reporting period was very small as the achievement of financial and physical indicators set for measures of Axes 3 and 4 to realise these goals was low. On the other hand, the Programme objective to promote development and cooperation of local initiatives was successfully reached. 90% of the surveyed representatives of LAGs stated that the implementation of the LEADER approach promoted cooperation in rural development. To sum up the results of the Programme implementation, socio-economic and environmental effects and impact on implementation of Community priorities, it may be concluded that the impact of the Programme was smaller than planned. Such result was conditioned by both exogenous factors (e.g. effect of the economic crisis) and internal reasons (e.g. underrated demand for certain supported actions). Nevertheless, the Programme ensures the strategic and integrated approach to solution of rural development problems, authorities administrating assistance take improvement actions, hence the Programme is likely to have a positive impact on increasing competitiveness of the Lithuanian agriculture, a positive effect on changes in the number and structure of rural inhabitants, employment, income, environmental protection.
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