1. Agriculture and the Agricultural reform in Poland Bart Baudonck Elke Slegers Sofie Vanderheyden Wesley Deprez Wesley Guerra8 December 2003

2. INTRODUCTION

3. Since transition: Agricultural recession –Unfavourable development terms of trade –Reduced production (lifestock sector) Agriculture as % GDP: 13% (’89)  6% (’96) Agricultural labour force: 27% of total (inflated) Very low labour productivity Part-time farming Self sufficiency ~ 100%

4. ModelINTRODUCTION Agricultural products: 13% export; 11% imports Trading partners: EU-15 ( ↓ ) and Russia ( ↑ ) Crops: cereals, potatoes, fodder crops, sugar beet, oilseeds and pulses Fruit and fruit products: export Livestock sector: export Agricultural production & trade

5. AGRICULTURAL REFORM

6. Reform of the agricultural system of transition economiesinvolves four main elements (Liefert and Swinnen, 2002): - Market liberalisation - Farm restructuring - Supporting market infrastructure (credit markets) - Restructuring upstream and downstream operations

7. AGRICULTURAL REFORM MARKET RESTRUCTURING: Price liberalisation - Elimination of state subsidies to producers and consumers producer price = consumer price - Hyperinflation government intervention and establishment of the Agency for Agricultural Markets (AMA) - Producer’s terms of trade worsened

8. AGRICULTURAL REFORM MARKET RESTRUCTURING: Trade liberalisation - Loss of markets within the former Sovjet Union - Compensated by export growth to the EU - End 1990: agricultural exports exceeded pre-reform levels

9. AGRICULTURAL REFORM FARM RESTRUCTURING: Privatisation - Agricultural Property Agency (APA) formed in 1992 - Slow process: 100,000 ha annually sold - Problems: - Lack of a restitution lawleasing of land - Uneven distribution of State land across the regions

10. AGRICULTURAL REFORM FARM RESTRUCTURING: Land reform - Private ownership of agricultural land is legal - Land transactions: - no restrictions - dominated by leasing - high level of transaction costs (12.5%) - Problem of land registration

11. AGRICULTURAL REFORM FARM RESTRUCTURING: Number of holdings by size classes (000 holdings) Category 1990 1995 1996 1997 1998 2000 2000 in % 1 to 2 ha 378.3 428.8 462.2 439.2 449.4 448.2 23.8 2 to 5 ha 750.8 690.3 667.6 691.0 676.5 613.6 32.6 5 to 10 ha 636.3 545.2 520.8 503.1 491.2 447.7 23.8 10 to 15 ha 242 219.5 217.2 206.2 202.8 185.7 9.9 15 ha and more 130.1 163.8 173.6 168.8 170.3 185.7 9.9

12. AGRICULTURAL REFORM ACCESS TO CREDIT: - Initial network of the Bank for Food Economy (BGZ) - Bank are reluctant to lend to farmers: - Loans used to be backed up by the government - Imperfect information - Inferior bank management - collateral problem - Government interference remains - Importance of credits offered by input or agro-processing companies

13. AGRICULTURAL REFORM RESTRUCTURING UPSTREAM AND DOWNSTREAM: Downstream -privatization of food processing enterprises has progressed well -State trading monopolies have been disbanded Upstream - privatisation and demonopolisation are less succesful availability of inputs

14. AGRICULTURAL OUTPUT

15. Source: FAO and Eurostat

16. AGRICULTURAL OUTPUT Output decline decline in production observed in most CEEC’s crops survived better than livestock

17. AGRICULTURAL OUTPUT Evolution of crops Source: European Commission

18. AGRICULTURAL OUTPUT Evolution of livestock Source: European Commission

19. LABOUR RESTRUCTURING

20. Evolution of employment in agriculture Source: Eurostat Comparison with other CEEC’s % of agricultural employment in total employment in Poland

21. LABOUR RESTRUCTURING Reasons for high % working in agriculture: few state-owned firms a lot of small firms

22. LABOUR RESTRUCTURING Jobs outside agriculture? HOWEVER: education, cost of commuting Age of farmers: 50+ = 39.2 % of farms percentage overestimated: hidden unemployment

23. LABOUR RESTRUCTURING Changes in Productivity Productivity increase in agriculture of 3.8 % (1990-2000) Hungary: 6.4%, Czech Republic: 15.9% Compared to EU:

24. LABOUR RESTRUCTURING Slow increase in productivity is due to: –large farm fragmentation –low production specialisation –large agrarian population

25. Determinanten van de arbeidstroom uit de Europese landbouw Overzicht - Hypothesen - Beschrijving arbeidssituatie in de Europese landbouw - Model - Bespreking resultaten - Conclusies EU ACCESSION AND IMPACTS

26. Treaty of Accession in April 2003 -> Poland member of EU in May 2004 EU standards - acquis communautaire (agriculture) Obstacles : - Number of farms & workers in agricultural sector (difficult to competitiveness) - Address effects of complying with CAP - …

27. EU ACCESSION AND IMPACTS Agreements - Accession partnerships (priority areas in which further work is needed) ->Priorities in field of CAP: upgrade capacity of agricultural administration continue upgrading of agri-food processing establishments (EC food safety standards & legislation) … -> still major concerns by Commission - Europe Agreement (aim to barriers to trade) - Bilateral agreement (double-zero agreement: liberalisation of wide array of products, fully or within tariff quotas)

28. EU ACCESSION AND IMPACTS Pre-accession aid (2000-2006): - Phare: (institution building & infrastructure to meet requirements of acquis) - ISPA (structural policies: environment & transport) - Sapard (Special Accession Program for Agriculture & Rural Development) (after accession: structural funds)

29. EU ACCESSION AND IMPACTS Sapard: - support implementation of acquis (CAP) - solve problems for sustainable adaptation of infrastructure & rural development - decentralised approach: implementation by national authority (Poland: July 2002 -> 5 measures) - in 2002 for Poland: € 177 Mio

30. EU ACCESSION AND IMPACTS Main aims of Sapard in Poland: - To improve economic viability of Polish agriculture & to be able to meet new opportunities on domestic & international markets - To adapt the agri-food sector to EU standards in respect of hygiene, quality & animal welfare - To encourage multifunctional rural development

31. EU ACCESSION AND IMPACTS The CAP - The ‘Common Agricultural Policy’ - Needed to be reformed - The current CAP's future policy objectives are in short: - to improve the Union's competitiveness through lower prices - to guarantee the quality and safety of food - to ensure stable incomes and a good standard of living for the farmers - to make the production methods more environmentally friendly and to respect the animals rights - to integrate some environmental goals into its instruments - to search for alternative jobs and incomes for particular farmers

32. EU ACCESSION AND IMPACTS - Main questions are set for *quotas: what production levels to choose? *direct payments: gradual introduction? *transitional periods: how long?

33. EU ACCESSION AND IMPACTS The CAP and Poland: - Expectations: *Cereals *Meat - Quotas: *EU standards *Exemptions

34. EU ACCESSION AND IMPACTS Reaction of Poland concerning the CAP - Strange situation… - Rejection of the transition period… cf. Spain in 1986 - Reaction of Franz Fischler (European Commissioner for Agriculture)

35. POLICY DISCUSSION

36. - Importance of human capital agricultural labour outflow focus on the profitable farms - Restitution law important for privatisation - Seperated rural credit market