1. 11.06.2016 Division of Resource Economics Evidence of Land and Water Reforms in Bulgaria Dr. Violeta Dirimanova DAAD Summer Workshop Kiev, 7-11, September, 2009 E-mail: violeta_dirimanova@yahoo.comvioleta_dirimanova@yahoo.com

2. Division of Resource Economics 11.06.2016 Outline Land reform during collectivization in Bulgaria Reasons for economic crisis after 1990 Land reform during post-socialistic Bulgaria Effects of land reform during post-socialistic Bulgaria – two case studies regarding land fragmentation (case 1) and soil degradation (case 2) Water reform – changes of the irrigation sector in Bulgaria (case 3) Dr. Violeta Dirimanova 2

3. Division of Resource Economics 11.06.2016 Land reform during collectivization in Bulgaria (1) (Hanisch 2003, Dirimanova 2008) The land reform started in 1946 with collectivization of the farmland from their owners Total farmland 6.2 million ha –4.7 million ha of arable land –0.6 million ha of permanents crops (orchards and vineyards) –1.5 million ha of permanent grass Farm structure –Agro-industrial complexes (AICs) – 81% of arable land Producer cooperatives (TKZSs) State agricultural farms (SAFs) Machine and tractor stations (MTSs) and brigades –Other organizations – 6% of arable land –Privet plots – 13% of arable land 3 Dr. Violeta Dirimanova

4. Division of Resource Economics 11.06.2016 Land reform during collectivization in Bulgaria (2) 4 Dr. Violeta Dirimanova

5. Division of Resource Economics 11.06.2016 The economical crisis after 1990 Decentralization of farm structure Low agricultural productivity High unemployment Low income level Unclear agricultural policy Unstable social-security system 5 Dr. Violeta Dirimanova

6. Division of Resource Economics 11.06.2016 Land reform during post-socialistic Bulgaria (1) Started in 1990 with Law of the Ownership and Use of Agricultural Land Restitution of farmland to owners prior to 1946 Liquidation of the collective and state farms Reallocation of the land to original owners or their inheritors and non-land assets allocate to eligible owners The property of the former co-operative farms is restituted to between the members of the cooperative New farm structure –State farms –Organizations under liquidation (1990-1995) –Farming companies –Cooperatives –Individual farms Dr. Violeta Dirimanova 6

7. Division of Resource Economics 11.06.2016 Land reform during post-socialistic Bulgaria (2) 7 Dr. Violeta Dirimanova

8. Division of Resource Economics 11.06.2016 Effects of land reform during post- socialistic Bulgaria Positive effects –Legally defined land property rights - land market –Biodiversity and crop diversity - natural risk –Social injustices –Potential for natural regeneration –Increase the income of rural population Negative effects –Land fragmentation in ownership and use (case 1) –Soil degradation/soil salinisation (case 2) –Land abandonment –Low productivity of the production –Destroying irrigation equipments (case 3) –Destroying machinery stations, animal husbandry, and also orchards and vineyards areas Dr. Violeta Dirimanova 8

9. Division of Resource Economics 11.06.2016 Case 1: Land fragmentation (Dirimanova, 2008) Land fragmentation is breaking up a land into smaller pieces that are not joined (Binns 1950, Bentley 1997, Dijk 2003, Niroul and Thapa 2005, etc) Land fragmentation in ownership –many holders equally share the full rights of property over land with a single title (‘co-ownership’) –multiplicity of non-contiguous parcels owned by a single individual (‘physical land parceling’) Land fragmentation in use multiplicity of non-contiguous parcels used by a single farm enterprise Dr. Violeta Dirimanova 9

10. Division of Resource Economics 11.06.2016 land fragmentation in ownership = co- ownership Dr. Violeta Dirimanova 10

11. Division of Resource Economics 11.06.2016 Land fragmentation in use = physical land parceling Dr. Violeta Dirimanova 11

12. Division of Resource Economics 11.06.2016 Violeta Dirimanova 12 Selection of the study regions RegionRegion L RegionRegion A Region H

13. Division of Resource Economics 11.06.2016 Case 1: Empirical setting - study regions REGION LREGION AREGION H V L1 V L2 V A1 V A2 V H1 V H2 Average plot size, ha2.371.270.800.290.580.27 Number of plots/owner1.571.852.733.935.186.36 Land per owner, ha3.732.352.201.073.001.73 Abandonment landno 5%40%10%80% Population452419456675302676 Age of the population686065576367 Crop structuregrain productionvegetables, orchards, vineyards grain production, meadows Natural conditionsflat areaflat area and semi- mountain semi-mountain and mountain Soil characteristicsfertile but not irrigated fertile and irrigated infertile and not irrigated Dr. Violeta Dirimanova 13

14. Division of Resource Economics 11.06.2016 Case 1: Empirical setting - actors Landowners –Absentees – ‘do nothing’ with their land –Locals – unable to work land alone or ‘do subsistence farming’ Land users –Large commercial farmers – operate as limited liability companies, joint stock companies or trade associations –Cooperatives – operate as ‘mediators’ among large commercial farmers and landowners. Dr. Violeta Dirimanova 14

15. Division of Resource Economics 11.06.2016 Case 1: Informal institutional change Land users (cooperatives, commercial farms, and individual producers) are main beneficiaries from the land reform: –Access to information and document files –Heavy machinery and aircraft services –Specific knowledge –Credit market Land users are those who bring the land to efficient use and they fully benefit from it Solution for exercising land use rights is a cooperative behavior among: –large scale land users –individual land users Dr. Violeta Dirimanova 15

16. Division of Resource Economics 11.06.2016 Cooperation among all large-scale agricultural producers –Large farmer 1 –Large farmer 2 –Large farmer 3 –Large farmer 4 Dr. Violeta Dirimanova 16

17. Division of Resource Economics 11.06.2016 Cooperation among individual agricultural producers –Individual producer 1 –Individual producer 2 Dr. Violeta Dirimanova 17

18. Division of Resource Economics 11.06.2016 Case 1: Formal institutional change Giving rights to only one owner (often local) to sign a contract with land user Reducing financial costs for land transaction for sale land market Providing opportunity to land users first to buy land, if owners decide to sell their property in the market Economic effects of such institutional change very efficient for land users but social effects for rural areas are neglected Dr. Violeta Dirimanova 18

19. Division of Resource Economics 11.06.2016 Case 1: Conclusions Land fragmentation in ownership lead to partially exercising property rights-in-practice Co-ownership and physical land parceling imposes more costs for landowners and land users. Therefore, cooperative behavior among actors must dominate than opportunistic ones Two types of land distribution: between heir and between local land users Land and wealth is redistributed better among powerful land users then co-owners Role of the state is to support development of institutions for facilitating land allocation Dr. Violeta Dirimanova 19

20. Division of Resource Economics 11.06.2016 Case 2: Land degradation (Penov, Manolov, et al, 2008) One of major problem - soil salinisation Two groups leading to soil salinisation: natural and institutional –Natural – insufficient soil draining, shallow ground water table with high mineral content –Institutional factors – PRs and governance structure Soil salinisation has impact on irrigation and drainage infrastructure, water and land Dr. Violeta Dirimanova 20

21. Division of Resource Economics 11.06.2016 Violeta Dirimanova 21 Selection of the study village Belozem

22. Division of Resource Economics 11.06.2016 Case 2: Empirical setting – study village Villgae Belozem – South Bulgaria Total area of village’s land – 4200 ha, 1200 ha of total land not cultivated because of salinisation The village’s water (hydro-carbonate and sodium calcium) contains higher concentration of salts compared to the water from the centralized irrigation system Soil salinisation processes – influenced by karsts water running through Eocene limenstone and water streaming from the hills (north from the village) Dr. Violeta Dirimanova 22

23. Division of Resource Economics 11.06.2016 Case study 2: Empirical setting - actors Land users –large farmers – mainly cultivate rented land –medium and small size farmers - cultivate their own land and relatives’ land –no clear perception weather degradation increase or decrease over time Landowners - rent out land and do subsistence farming Experts – soil experts (no visible degradation problem), director from local office of the MAF (serious problem but also declining organic matter and soil compaction), expert form local office of the MEW (not severity of the problem) Dr. Violeta Dirimanova 23

24. Division of Resource Economics 11.06.2016 Case 2: Informal institutional change Source of information regarding policy measures (internet, television, newspapers, world of month) Farmers often visit local office of the MAF for information regarding policy No many activity for local office for soil conservation Voluntary decision by farmers to implement technical soil conservation practices Dr. Violeta Dirimanova 24

25. Division of Resource Economics 11.06.2016 Case 2: Formal institutional change Started after 2000 and especially country accession to the EU Well-established system of strategies, progarmmes and legislation regarding soil protection at national level Main soil conservation objectives for the region of Belozem outlined in regional strategy for development of municipal plan for 2007-2013 Most of policy measures has indirect impact on soil conservation (i.e. per hectare payment programme, support for purchasing equipment, well registration, monitoring of soil conservation in water, etc. Dr. Violeta Dirimanova 25

26. Division of Resource Economics 11.06.2016 Case 2: Conclusions Local farmers aware of salinisation problem, when there are some policy instruments. The reason is that there are missing institutions, for instance –no collective actions to maintain the irrigation and drainage system, –no monitoring on the salinity level of the underground water resource and –no bringing the policy instruments close to the farmers) Lessons for conservation policy suggest that –Technical solution need to be supported by appropriate institutional settings –Supported actions need to be promoted by established sustainable institutions –More cooperation among farmers, state organizations and NGO’s –More transparency for application procedures Dr. Violeta Dirimanova 26

27. Division of Resource Economics 11.06.2016 Reform of water usein Bulgaria (1) (Penov 2004, Theesfeld 2008) The first Water Syndicates (WS) were founded in 1921 (small scale farming before collectivization) During communistic regime, 4200 producer cooperatives (TKZS) were established in 1952, consolidated 60% of farmland 1970s were established 269 Agro-industrial complexes (AIC) with average size of 10000 to 15000 ha. However, socialist period let to changes in irrigation sector In mid-1950s, WS were liquidated and government started new programs and promote irrigated agriculture under producer cooperatives, which built small dams and canal system with financial state support Dr. Violeta Dirimanova 27

28. Division of Resource Economics 11.06.2016 Reform of water use in Bulgaria (2) (Penov 2004, Theesfeld 2008) Producer cooperative (TKZSs members) members did not regard water as a scare resource and constructed open-water basins and open canals, which resulted in water loss due to evaporation Political decision-makers in Bulgaria ignored the environmental consequences of irrigation practices. Irrigation causes several water-related environmental problems and damages such as water erosion (affected over 80% of farmland), wind erosion (affected less than 40%) After transition period 1,6 micro scale farmers became familiar with irrigation practices, they used to the fact that canals were filled with water throughout the season, condition of plentfuil water at no cost has shaped their mental models until today Dr. Violeta Dirimanova 28

29. Division of Resource Economics 11.06.2016 Irrigation in Bulgaria during the transition Dr. Violeta Dirimanova 29

30. Division of Resource Economics 11.06.2016 Violeta Dirimanova 30 Selection of the study region Region Plovdiv

31. Division of Resource Economics 11.06.2016 Case 3: Empirical setting (Penov 2004) Location – Plovdiv region Determents of institutional changes: features of transactions, characteristic of actors, formal property rights and governance structure Institutional options: match with features of transaction, response of actors and recommendations Dr. Violeta Dirimanova 31

32. Division of Resource Economics 11.06.2016 Case 3: Features of transactions (Penov, 2004) Appropriation transactions: Water –Low excludability –Substractability –Heterogeneity in water usage –Uncertainty and complexity Provision transactions: Infrastructure –Assets specificity and hold up problems –Complex systems –Connectiveness Dr. Violeta Dirimanova 32

33. Division of Resource Economics 11.06.2016 Case 3: Characteristics of actors Small Farmers - many –Short planning horizon –Insufficient trust and opportunistic behaviour –Lack of organisation capacity –Weak bargaining position Large Farmers - few –Organisation capacity –Strong bargaining position –Strategic behaviour Dr. Violeta Dirimanova 33

34. Division of Resource Economics 11.06.2016 Case 3: Characteristics of actors Irrigation company –Organisation capacity –Strong bargaining position –Lack of trust –Strategic behaviour Local Municipalities –Organisation capacity –Reputation Dr. Violeta Dirimanova 34

35. Division of Resource Economics 11.06.2016 Case 3: Formal property rights Water –State property rights of water resources –User rights to the surface irrigation water –Limited private property rights to underground water resources Irrigation Infrastructure –State property-main canal systems, large water dams –Unclear property rights on secondary canals. –Local municipalities - temporary rights and duties regarding the small water dams Dr. Violeta Dirimanova 35

36. Division of Resource Economics 11.06.2016 Case 3: Governance structure Rules: market - local monopoly; hierarchy - state set the price Poor local level co-ordination Monitoring: limited to the main canals Incomplete conflict resolution mechanisms Ineffective sanctioning mechanisms, in the case of small producers Dr. Violeta Dirimanova 36

37. Division of Resource Economics 11.06.2016 Case 3: Informal property rights in practice Water –Limited effectiveness of the FPR to surface water –Limited effectiveness of the FPR to ground water –Limited effectiveness of users rights to water Irrigation infrastructure –Limited effectiveness of the FPR to main canals –Private use rights on the secondary canals Dr. Violeta Dirimanova 37

38. Division of Resource Economics 11.06.2016 Case 3: Institutional options Local municipalities - poor local level coordination through hierarchy Non state organization- poor local level coordination through self-governance Shareholding companies Small groups WUA Water users participation in the Irrigation Company management-local monopoly through hierarchy and self-governance Improvement of court procedure-poor formal sanctioning mechanism through hierarchy Dr. Violeta Dirimanova 38

39. Division of Resource Economics 11.06.2016 Case 3: Response of actors Dr. Violeta Dirimanova 39

40. Division of Resource Economics 11.06.2016 Case 3: Match with features of transactions Dr. Violeta Dirimanova 40

41. Division of Resource Economics 11.06.2016 Case 3: Effect on resources usage Dr. Violeta Dirimanova 41

42. Division of Resource Economics 11.06.2016 Case 3: Conclusions and recommendations Dr. Violeta Dirimanova 42

43. Division of Resource Economics 11.06.2016 General conclusions Introducing formal legislation and policy instruments should be considered not as the end but as the beginning of the process of institutional change … cause they need time to be adapted in practice!!! Dr. Violeta Dirimanova 43

44. Division of Resource Economics 11.06.2016 Literature Dirimanova, V. (2008). Economic effects of land fragmentation: property rights, land markets and contracts in Bulgaria. Volume: 29, Aachen: Shaker. Hanisch, M. (2003). Property reform and social conflict: a multi-level analysis of the change of agricultural property rights in post-socialist Bulgaria. Volume 15. Aachen: Shaker Penov, I., Manolov, I. et al. (2008) Case Study Report– Bulgaria on soil/land management and policy measures under SoCo project. http://soco.jrc.ec.europa.eu/casestudies.html Penov, I. (2004). The use of irrigation water in bulgaria's Plovdiv region during transition. Journal of Environmental Management, vol. 34 no 22, pp. 304-313 Theesfeld, I. (2005). A common-pool resource in transition. Determinants of Institutional Change in Bulgaria’s Postsocialist Irrigation Sector. Institutional Change in Agriculture and Natural Resources, Volume 23. Aachen: Shaker Dr. Violeta Dirimanova 44