European Stability Initiative - ESI - 22 October 2017, 01:14
URL:

SAPARD and Rural Development

September 2007

Lacking development of rural areas is a challenge all over the Balkans. The Special accession programme for agriculture and rural development (SAPARD) has made a crucial contribution to address these problems in Bulgaria.

The challenge

A decade ago the situation in Bulgaria's countryside was catastrophic. Government policy in the early 1990s had forced the agricultural sector into sharp decline. While price liberalisation had led to an increase of input prices (such as fertiliser) by 500 percent from 1990 to 1991, output prices for agricultural products were still largely government controlled and increased by only 173 percent in the same period. This disadvantageous relationship between input and output prices remained more or less stable until 1996.* EC, Directorate General for Agriculture, Agricultural Situation in the Candidate Countries. Country Report on Bulgaria, July 2002, p. 11.

Also governmental subsidies to agriculture were cut sharply. A UNDP report, based on data of the OECD, notes that "a comparison between the producer support estimate and the consumer support estimate indicates that during that period [up to 1997] the state indirectly expropriated funds from the producers to support consumers."* UNDP, Bulgaria National Human Development Report 2003 – Rural Regions: Overcoming Development Disparities, Sofia 2004, p. 45.

Furthermore, a disastrous land restitution policy which was implemented on a stop-go basis during the 1990s led to a highly fragmented land-owning structure, leaving the majority of private farms with an area of less than 2 hectares. The EC notes in its opinion that by April 1997, land claim ownership certificates had been issued for about half of the restitutable land, but only 8 percent of owners had been issued with formal land ownership titles.* EC, Commission Opinion on Bulgaria’s Application for Membership of the European Union, 15 July 1997, p. 75. Less than 10 percent of the total number of agricultural and food processing enterprises had been privatised by the end of 1995."Most of the state-owned enterprises are in a critical financial situation."* EC, Commission Opinion on Bulgaria's Application for Membership of the European Union, 15 July 1997, p. 76.

The Ministry of Agriculture had little information. Lacking an own statistical unit, it had to rely on the National Statistics Bureau and even some very basic data were not available. For example, the government did not even know how many farms there were in Bulgaria. This made the development of realistic policies impossible.

The result was dramatic. Agricultural production had declined constantly in the early 1990s, "reaching a low in 1996, where it dropped to about 62 percent of the 1990 level".* EC, Directorate General for Agriculture, Agricultural Situation in the Candidate Countries. Country Report on Bulgaria, July 2002, p. 9. Also livestock numbers had fallen dramatically to about half of their 1990 level.* EC, Commission Opinion on Bulgaria’s Application for Membership of the European Union, 15 July 1997, p. 75.

Thus, in early 1997, Bulgaria's rural population of some 3.2 million people* See: Republic of Bulgaria, National Strategy Plan for Rural Development (2007-2013), Sofia, September 2006, p. 21 (data for 2004; out of total population of 7.9 million). were far worse off both compared to their situation in 1990 and to other countries in transition. As Gerald Creed, who has done field research in a Bulgarian village from 1987 to 1997, wrote:

"In Bulgaria in the mid-1990s there was still no clear destination in sight. As one villager expressed it in 1995, ‘We have no system in Bulgaria, no capitalism, and no socialism. We are without a system'."* Gerald W. Creed, Domesticating Revolution. From Socialist Reform to Ambivalent Transition in a Bulgarian Village, Pennsylvania State University Press, 1998, p. 278.

"Zamfirovo residents are not innately conservative. Many welcomed the prospects of change in 1989 as long overdue. But they wanted change that took their concerns and desires seriously, that responded to their cultural and economic interests. (…) The resulting failure of transition leaders to consider or address rural concerns reminded villagers of the early years of socialism, which they recalled so negatively. This, in turn, provoked anxiety about the future and led them to embrace domesticated socialism as a means of defense against would-be capitalist excesses."* Gerald W. Creed, Domesticating Revolution. From Socialist Reform to Ambivalent Transition in a Bulgarian Village, Pennsylvania State University Press, 1998, pp. 276-77.

The SAPARD Programme

For Bulgaria, the turning point came in 1997/98, when the EU announced that it would design a Special Accession Programme for Agriculture and Rural Development (SAPARD). This programme would offer substantial annual allocations from 2000 to 2006 for rural development policies, under the condition that Bulgaria set up the required institutions to manage such a programme in accordance with the EU's standards. At that time, Bulgarian agricultural policy was in disarray and nobody in the Bulgarian administration had heard of rural development. It is an excellent illustration of the EU's extraordinary power to trigger substantial change in a very difficult and challenging area.

The new approach required, first of all, to find out how the agricultural sector and Bulgaria's rural areas looked like. This meant gathering data on the situation in the countryside and analysing them. Second, it required to develop – based on this analysis – realistic policies with concrete measures how to address the identified priorities. And third, it required the building of (new or existing) institutions with the capacities to implement these measures. This included the strengthening of the Ministry of Agriculture as well as inspectorates, testing laboratories, the veterinary and plant health services, border crossings, and – most importantly – the setting up of a SAPARD Agency which would manage the SAPARD programme.

These challenges were taken very seriously. From 1998 onwards, all governments, from the reform government under Ivan Kostov, the government of the former King Simeon II as well as the current socialist government, followed these new policies.

In 1998, in response to the announcement of the SAPARD programme, the Ministry of Agriculture set up a "SAPARD task force". Until then, "rural development" was a term unknown in the Bulgarian administration. A young ministry official, Miroslava Georgieva, was to head the small team of five people. Its two key tasks were to drastically transform Bulgarian policy in the countryside: first, to develop a coherent policy in the form of a National Agricultural and Rural Development Plan (NARDP) to address the huge challenges, and second, to set up an institution for its implementation.

The development of a NARDP and the setting up of a SAPARD agency were the two main preconditions to draw on EU funds for agriculture and rural development. The task for both lay with the Bulgarians, but they had to meet the EU's criteria of quality, transparency and accountability.

Immediately the need for better data became very obvious. In 1999 a statistical department was created in the Ministry of Agriculture and the first survey conducted ("land use and land cover survey"). Step by step more surveys, on yields, livestock, milk production, diaries and slaughterhouses, etc., were added. The staff grew and in 2003 the department was transformed into a directorate for agro-statistics. Today it has more than a hundred staff, the majority working in the outlets in the 28 districts, and produces all the agro-statistics that the EU requires. It publishes 3 monthly surveys, 7-8 annual surveys, 2 bi-annual surveys, and also an agricultural census was for the first time conducted in 2003.* ESI interview with Nelly Georgieva, director of the directorate for agro-statistics in the Ministry of Agriculture, 9 May 2005.

The SAPARD task force, transformed in 1999 into a directorate of the ministry, had the leading role in developing Bulgaria's National Agricultural and Rural Development Plan. This document of more than 430 pages was first prepared in 1999, but subsequently up-dated. Based on thorough analysis, it identified policy priorities and developed concrete measures, following EU-style rural development policies, how to address them. The three most important ones were "investments in agricultural holdings", "improving the processing and the marketing of agricultural products" and "development and diversification of economic activities in rural areas". The plan included clear goals and performance indicators for each measure and a budgetary framework that identified the required funds.

The Task Force was also crucial in the most ambitious institution building exercise in the rural development sector, in setting up the SAPARD Agency, the body that was tasked to implement the programme. It was located in (and is formally part of) the State Fund Agriculture which deals with national support to agriculture. The agency has two departments: an operational department that deals with the programme as such, in particular with incoming applications, and had offices in each of the 28 districts; and a financial department, dealing with payment and accounting, with offices in the six Bulgarian planning regions. By early 2005 it its staff reached 480 people and increased further to over 1,000 people in 2006.

The SAPARD programme is run in a completely decentralised way, meaning that the Bulgarian institutions control the whole process and the EU, while participating it the monitoring committee, does only ex-post evaluations. Farmers, companies and municipalities can apply under the specific measures with concrete projects. Project selection is done by the selection committee composed by representatives of the SAPARD Agency, the Ministry of Agriculture and by producer associations and other non-governmental bodies. A monitoring committee, of which nearly half of the members with voting rights are unions and associations, oversees the whole process. In the work of this body and its permanent working groups for each SAPARD measure participate no less than 53 non-governmental organisations.* Website of the Bulgarian Ministry of Agriculture and Forestry.

On 13 September 2000, the STAR Committee in Brussels approved the Bulgarian NARDP and on 15 May 2001 the EC decided to confer the management of the first three measures to the SAPARD Agency. Bulgaria was the first of the 10 East and Central European countries to receive the go-ahead for the SAPARD programme, which in Bulgaria officially started on 1 June 2001.

Negotiations

Negotiations on the agriculture chapter were the second force that triggered immense change. The chapter was opened on 21 March 2002 and provisionally closed on 4 June 2004 as one of the last chapters to be provisionally closed.* Bulgarian Ministry of Foreign Affairs.

A leading role had the ministry's directorate for European integration established in 1998, growing out of the unit for analysis of agricultural policies. Its staff of 7 people grew to over 40, in particular to work on Chapter 7 negotiations, one of the most comprehensive and difficult chapters. The respective working group, chaired by the deputy minister of agriculture, had some 30 members and there were 16 sub-groups on veterinary issues, plant control and 14 sectors like meat and cereals. Besides huge legislative changes, the membership negotiations triggered changes in the overall agricultural framework. There were also many Phare twinning and technical assistance projects, 20 alone from 2001 to 2004. The areas ranged from Veterinary and phytosanitary control, food safety, the establishment of institutions and systems required for the Common Agricultural Policy (CAP), the wine sector to the approximation of legislation.* Source: List of Phare projects in the agriculture and rural development sector (2001-2004), provided by the EC Delegation in Sofia.

Clearly, the usefulness of all this – laws, institutions and strategic plans – is to a large extent determined by the practical impact on rural areas.

Impact

By 31 May 2007, 2,833 SAPARD projects with total costs of € 1.3 billion had been approved. The public contribution to these project amounted to € 658 million, out of which € 494 million were covered by the EU and € 164 million by the Bulgarian budget.* SAPARD financial monitoring, spreadsheet, 31 May 2007 SAPARD financial monitoring, spreadsheet (original sums in BGL transferred into EUR at 1 BGL = 0.511292 €). Of the EU contribution € 420 million or 85 percent of approved funds were already paid out.

By far the biggest amounts of money have gone into the up-grading of larger agricultural holdings (47 percent) and the improvement of food processing industries (38 percent). The remainder went largely to diversification of economic activities, in particular rural tourism and wood industry, (8 percent) and to the two "municipal measures" aiming at improvement of rural infrastructure (6 percent).

For examples of SAPARD projects see the subsections on Grand Agro in Rakovski, Bravo in the outskirts of Sofia and Todoroff in Brestovitza.

In addition to the effects related to concrete SAPARD measures, the Bulgarian rural areas overall are witnessing encouraging developments.

As agricultural producers have to be registered in order to be able to draw on SAPARD funds, national support and on EU aid to semi-subsistence farms starting from 2007, the number of registered agricultural producers has risen from 29,059 in 2001 to 64,127 in 2005.* Ministry of Agriculture and Forestry, Annual Report 2004, p. 18, and Annual Report 2005, pp. 15-17. In addition there are 65,965 tobacco producers. This is a clear sign that the policies are reaching the target constituency. Earlier, when most farmers did not see any benefit from the state and its agricultural policies, most did not bother to register.

Another important indicator is the agricultural trade balance, which recently recovered. After peaking in 1995 at some € 900 million, followed by a drastic downturn in 1996 and 1997, agricultural exports continued to decrease and in 2000 stood at €550 million. At that time the agricultural trade balance was positive for only about € 100 million and it was negative with the EU.* EC, Directorate General for Agriculture, Agricultural Situation in the Candidate Countries. Country Report on Bulgaria, July 2002, pp. 22 and 25. The share of processed products stood at about € 180 million.* EC, Directorate General for Agriculture, Agricultural Situation in the Candidate Countries. Country Report on Bulgaria, July 2002, p. 24. Then trends reversed and exports recovered to € 873 million in 2004, with the share of processed products nearly doubling compared to 2002 and making up for nearly half of agricultural exports in 2004. The agricultural trade balance for that year was plus € 204 million.* Ministry of Agriculture and Forestry, Annual Report 2005, p. 151.

Table: Agricultural exports (US$ million)* Ministry of Agriculture and Forestry, Annual Report 2004, p. 128, and Annual Report 2005, pp. 140-41.
 

Exports

o/w processed products

Balance

2002

716

287

240

2003

783

372

185

2004

1,055

499

247

As a sign of improved competitiveness and of meeting EU standards, agricultural exports to the EU doubled between 1997 and 2004 and grew faster than agricultural imports from the EU.

Table: Agricultural trade with the EU* Sources: EC, Directorate General for Agriculture, Agricultural Situation in the Candidate Countries. Country Report on Bulgaria, July 2002, p. 25; Ministry of Agriculture, Annual Report 2005, p. 153 (for 2004). Data for 2004 available in US$ were converted using the rate of 30 June 2004.
 

Exports to EU-15

Imports from EU-15

Balance

1997 (million ECU)

176

151

+25

2000 (million ECU)

185

205

-20

2004 (million US$/EUR)

404/334

331/274

+73

Signs of recovery of the rural areas can also be seen in socio-economic indicators. Most importantly, unemployment in rural areas has drastically decreased: according to a UNDP study, at the end of 2002, rural unemployment stood still at 20.9 percent, compared with 15.4 percent in urban areas.* UNDP, Bulgaria National Human Development Report 2003 – Rural Regions: Overcoming Development Disparities, Sofia 2004, p. 23. However, rural unemployment has decreased to 14.6 percent in 2004, 13.7 percent in 2005 and 12.9 percent in the 3rd quarter of 2006.* National Statistical Institute website.

Finally, capacity now exists to absorb even more money to be made available for rural development in Bulgaria by the EU, which bears the potential for serious catching up and cohesion. The indicative allocation for Bulgaria from the European Agricultural Fund for Rural Development (EAFRD) for the period 2007-1013 amounts to € 2.6 billion.* Republic of Bulgaria, National Strategy Plan for Rural Development (2007-2013), Sofia, September 2006, p. 39.

Examples of SAPARD projects:

Further reading:


© European Stability Initiative - ESI 2017
22 October 2017, 01:14