SERBIAN AGRICULTURE AND ITS PERSPECTIVES (Special Session Discussion) Žaklina Stojanović 1 Professor N. Novkovic supports us with basic data that represents both development in the past (for period 1981-2005) and perspectives of Serbian agriculture. A few important outcomes could be noticed: (1) agriculture still plays a vital role in Serbian economy; (2) Serbian agriculture is characterized by extensive structure of production and unfavourable productivity rate (Serbian agriculture is still struggling in the battle to achieve the gold 1980s); (3) SWOT analysis aloud author to conclude that it is necessary to establish the multifunctional (sustainable) development of agricultural sector in Serbia. Professor E. Erjavec made the same analysis for the Western Balkan region. He concludes almost the same: (1) high production potentials are poorly used in the WB region; (2) poor level of economic output per unit of production is noticed; (3) traditional agriculture dominates in most parts of the region; (4) the region is under a specific and urgent need for the reconstruction of farms and food industries. It has to be emphasized that professor Erjavec is not spiking only about primary sector of agriculture (agricultural sector definition includes also food industries). Presentations could be seen also in a wider context. On the first sight presented papers have different subjects, but if one looks closer the same meaning or conclusions could be underlined. Their common nominator could be identified in definition of Serbian agriculture perspectives put into the frame of desired European integration process. Key speakers put in the first line two significant questions: (1) What is expected from Serbian agriculture in the context of international integrations; (2) How does Serbian agriculture fit in international integrations processes? Both questions run a few important topics. Among them the most significant are: (1) WTO negotiations and WTO membership; (2) integration with and accession to the European Union; (3) transition from socialism to a full market economy; (4) current situation in Serbian agriculture (food sector); (5) transition process governing (adjustments speed and agricultural sector competitiveness building); (6) agricultural policy reforms (do we need agricultural or expended agricultural, e.g. rural policy). Serbia is in the process of WTO accession and intensively works on related terms and conditions that must fulfil. It is expected that Doha round will result with further significant reduction of trade-distorting support. On the other side, the EU CAP - a massive and complex policy that changes direction like a super tanker at sea, is also 1 Žaklina Stojanović, Ph.D., Economics Faculty, University of Belgrade, Serbia 73
turning direction. CAP reform is steadily moving EU agricultural sector closer to the world market conditions. The question is what will be most important applicable measures within CAP by the time Serbia joins the EU? International integrations are bringing more than just one unknown. That leads us to the only one process that is complete controllable - transition from socialism to a full market economy. Even the Copenhagen Criteria, besides some political targets (the establishment of democracy, the rule of law, protection of minority rights), among three economic criteria underlines creation of a functioning market economy, able to be integrated with the market-based economies of the existing Member States, as well as ability to withstand competition. That brings our main attention to the field of agricultural sector transition process governing and agricultural policy reforms in Serbia. It seems that these processes are of crucial importance for the success of Serbian international integrations. Establishing a market economy is often identified with changing role of government in the agriculture. Government withdraw from many of the functions that is used to perform (directing of socially/state owned farms, providing inputs and credit support, operating directly in commodity markets ). Parallel, it is expected from government to take on or strengthen many new functions necessary to ensure that the market functions well and that private operators have access to the information and resources needed in order to work effectively (establishment of new information system, education system, system of training and advice, new low system adopting and implementation ). It also means that farmers, trying to answer on the question What should I produce?, must look at himself (his own interests, abilities, experience), must look at his farm (potential of his resources), must look at his market (demand analysis). But at the end or on the very beginning of this process, he will always look at the government policy (signals from his own government: export-import regime, tax policy, investments support ). During agricultural sector transition process important expectations are devoted to the following processes under government control: (1) agricultural (food sector) privatization; (2) structural reforms; (3) agricultural modernization; (4) fostering of rural economy diversification. Unlikely other countries, agricultural activity in Serbia have been based on both agrokombinates and family farms. It is obvious that a dual agricultural sector structure has been our main particularity. At the very beginning of our agribusiness transition the land ownership structure was following: (1) agrokombinates were managing with 600.000 ha of cultivated area; (2) family farm holdings were situated on 3,6 million ha (85% of the total cultivated area); (3) agricultural cooperatives were managing with 3% of the total cultivated area. In the context of structural reforms, transition process relay on agricultural production proponent s transformation. Privatization and restructuring of agrokombinates, development of 74
commercial family farms and cooperative sector reform have been identifying as important agricultural transition components. Previously mentioned processes will conduct to our country agribusiness model establishment compatible with worldwide model of a modern agricultural sector functioning. Agribusiness has to be seen as a modern system of food production and distribution. It includes integrated group of connections and relations accomplished between participants in a modern food system consisting of up-stream, farming and down-stream sector (input supply firms, agriculture farms and processing industry). «Borders» of agribusiness are not same in different countries. They are basically defined by the national economic policy. Developed countries governments have been very well aware of agricultural sector economic growth positive correlation with the «around agriculture» activities improvement. A modern agriculture is equal to agribusiness. Privatization of Serbian agribusiness is faster in the area of processing industry. We have to be aware of a fact that most of the privatized firms already were successful state/socially owned companies. Among them as the most attractive breweries, tobacco, dairy, sugar, miller and bakery capacities were recognized. If we have to evaluate up-stream agribusiness sector privatization in Serbia, significant leg behind related farming and down-stream sector processes might be marked. Respecting up-stream sector development importance for agricultural production, big agricultural input suppliers in our country have been included in the restructuring process today. Generally, 55% of food sector companies have been still waiting to be privatized. Possible number of firms that could be involved in the restructuring process prevails on public funds available for this kind of investments. Furthermore, the food processing companies, mostly with overestimated capacities, have been included as our agribusiness composition significant part. Most of these capacities are, even now, out of use. Displeasing technical equipped, these capacities brought important problems both in the area of the EU standards implementation and different social groups consent on privatization process. While the big agribusiness systems overwhelm with problems have been waiting for privatization and restructuring, necessity of the family farming model promotion as a basic proponent of our strategic food security arise. Reduction of the former socially/state sector role in the primary agricultural production requires compensation in the private sector development. Our agricultural policy measures are just directed to commercial family farming development. If we track indicator level by two census data within eleven years period (1991-2002), agricultural household s average size was slightly improved in Serbia (from 2.46 to 2,49 ha). It is also important to notice that in Central Serbia average size of family farms recorded 9.4% decrease, unlike to Vojvodina with almost for one third family farm average size increase. Important differences were indicated in the regional context too. An average agricultural producer in south-east 75
Serbia has been managing just with one third of average agricultural land property in north-west part of our country. It is also well known that a commercial holdings size could be different if farm was running different agricultural production activities. For example, large-scale farm is essential for crop in comparison with fruit or vegetable production. Thereof, previous notes could be just explained by specialization possibilities based on different regions comparative advantages. Never the less, the agricultural policy makers in Serbia are obviously given by extremely hard-achieving goal to reform very poor family farm sector structure. First dilemma that necessarily has to be solved in this area is related to the commercial family farming sector identification. The Agricultural Households Registration by-low was adopted at the beginning of 2004. Identification of agricultural budget users and agricultural production development supporting measures rationalization were nominated as these action strategic goals. Around 1/3 of total number of agricultural households were enrolled in register till now. Generally, the region of Vojvodina producers share in total number of enrolled agricultural households tends to be more then one half. On the other hand, unexpected low registration of agricultural producers from the central part of Serbia appeared. The crucial reasons for noted phenomena are the following: (1) agricultural producer s non-commercial (traditional) orientation; (2) significant number of old farmers; (3) lack of agricultural producers interest for development in spite of favourable financial conditions (low participation of risk takers and agricultural entrepreneurs). The most powerful agricultural development driving force is recognized in technological change. Modernization of Serbian agriculture has been addressed both on agricultural structural reforms and privatization process. The future we must face is less number of farmers, bigger farms and production that is much more specialized and focused on market requirements. Producers able to survive in the market conditions have to be supported by the agricultural policy measures. Rural development policy, on the other hand, will help to steer rural communities through the difficult transition from dependency on agriculture to a diversified rural economy structure. Thus, strategic goals of Serbian agriculture might be identified as following: (1) structural change (producers, ownership and institutions); (2) develop the market and its mechanisms (role of the government in the market economy, agricultural market, price policy, credit policy and other agricultural policy measures); (3) rural development and environment preservation. According to the stated goals, progressively reform of agricultural policy in Serbia is recommended. In the first phase of this reform, the existing commodity-related subsidies have been phased down and the resources redirected to investments that will make Serbian agriculture more profitable (grants, input subsidies, credits). Some of this support, such as the credit program, has been completely production- 76
neutral, sending no signals to farmers what to produce. In the second phase of agricultural policy reforms in Serbia input subsidies will be scaled down, as is likely to be required for Serbia s accession to the WTO, and the grant programs will be increasingly oriented to rural development, in line with trends in the EU. And in the third (final) phase, leading up to and including accession to the EU, Serbia will prepare for and adopt the support systems of the CAP as they then apply. It is likely that CAP will be centred on a system of flat-rate area payments, linked to various environmental criteria (unconnected with the farmer s production decision. Redirection of domestic support programs is addressed on the medium term goal of increasing competitiveness of Serbian agriculture by making more funds available for activities that will improve productivity, profitability and/or quality. It will help farmers to be more efficient, so they can be able to compete effectively even when such support is withdrawn. 77