Farming Systems Based Strategies for Improved Rural Livelihoods in Eastern Europe and Central

Farming Systems Based Strategies for Improved Rural Livelihoods in Eastern Europe and Central Asia

Stjepan Tanic and John Dixon

Farming Systems Development Officer in the FAO Subregional Office for Central and Eastern Europe and Senior Officer (Farming Systems) in the Farm Management and Production Economics Service, FAO HQ, Rome, Italy.

ABSTRACT

In Eastern Europe and Central Asia, major policy and institutional changes are transforming both small and large farms, and this process of change is expected to continue for the foreseeable future. Small farmers in particular, exposed to the added pressures of market liberalisation and globalisation, have new opportunities but also face immense threats. This paper[1] presents the results of a farming systems approach to the analysis of agricultural trends, emerging constraints and strategic priorities for agricultural and rural development in Eastern Europe and Central Asia. Both the approach and the findings for the Region are unique. The analysis highlights the importance of intensification and diversification (especially for family farms) in development strategies for raising farm incomes, as well as competitiveness in order to tap export markets.

INTRODUCTION

Agriculture in Eastern Europe and Central Asia (ECA)[2] has been caught up in the complex transformations of political and economic systems. Initially, all countries faced similar underlying challenges; however, because of substantial differences in the degree of prior market development and the level of political commitment, the progress in adopting and developing market-based agriculture in each country has differed substantially during the 1990s. Many farming systems, which were characterised by large-scale centralized collective or state management and ownership, are now dominated by privately or corporately owned and managed farms. Initially, production fell, economies contracted and urban and rural poverty increased substantially. The process also implies re-creating and re-shaping of agricultural production and management in most countries, for which the re-engineering of market and support institutions is essential. The major difficulty has been to create the basic enabling conditions for successful private family farming.

Widespread policy and institutional failures are clear evidence of a lack of proper understanding of farmers’ circumstances and the types of policy and institutional adjustments required to increase small farm incomes and competitiveness. In this context, Doppler (1994) noted the suitability of the Farming Systems Approach (FSA) to support the agricultural transition in Eastern European countries. Recently, the role of farming systems analysis in environment impact assessment has been recognized in the Central and Eastern European Sustainable Agriculture (CEESA) Project (Gatzweiler 2001). Modern FSA adopts a participatory, multi-disciplinary and holistic approach towards improved food seccurity and livelihoods, in which family structure, gender, social networks, local institutions and markets all play a role[3]. The approach has been applied in a global FAO/World Bank study of farming systems[4] (see Tanic and Dauphin 2001 and Dixon, Gulliver and Gibbon 2001). Both the approach and the findings have significance for the Region.

This paper sketches the major farming systems of the Region following a method described in Dixon (paper submitted to this Conference) and, in the context of differing farm size and organisation across these systems, examines strategic pathways for farm development.

EVOLUTION OF FARMING SYSTEMS

The Region supports a total population of 478 million and an agricultural population of 93 million. Of the 2.4 billion hectares (ha) of land in the Region, much is arid and semi-arid with only limited production potential, unless irrigated. More than half of the Region lies in the permafrost zone north of latitude 78º. Forest cover is extensive, especially in the taiga in Russia. Thus, annual or permanent crops cover only 293 million ha, of which about 29 million ha is equipped for irrigation. The most productive farming systems lie in the moist sub-humid areas in the west. Mountain and hilly areas with more than 30 percent slope are widespread in the southern part.

Although the Region as a whole is at an intermediate stage of economic development, the level varies widely across the Region. During the past decade, most economies have contracted and poverty has increased substantially. The relative importance of agriculture varies across the Region. Between 10 and 50 percent of national populations are dependent on agriculture. Region-wide, the sector contributed 12 percent of GDP in value added terms in 1998, but individual country figures range from 4 to 54 percent. The average contribution of agriculture to exports was 11 percent (World Bank 2000a).

While poverty levels have risen only moderately in the Baltic countries and Central Europe, they are significant in Poland and the Balkans. Poverty in Ukraine, Moldova and Belarus has risen dramatically. Per capita calorie consumption, which in the mid-1980s was higher than in the industrialised countries, had fallen by nearly 15 percent a decade later. Projections suggest a slow recovery over the next 30 years that will be facilitated by low population growth, but will still leave average consumption levels marginally below those of the mid-1980s.

Agro-ecological diversity and socio-economic developments, including those mentioned above, have resulted in the evolution of different farming systems. The afore-mentioned study identified eleven major farming systems in the Region, whose principal characteristics are set forth in Table 1[5]. The systems are also delineated on the Map (Figure 1) (except for the widely dispersed Urban Based System). To the extent possible, each of the farming systems has been associated with the specific region where it is the dominant in agricultural structure.

Figure 1 Major farming systems in ECA

Source: Tanic S. & Dauphin F. (2001).

Decollectivization and privatisation have been major components of the economic reform packages promoted during the transition. Except in Poland and the countries of former Yugoslavia, where small family farms were common, large collective and state farms have dominated ECA agriculture during the past half-century. Due to the variety of policy and institutional conditions, the formal legal setting varies from country to country (Figure 2), as does the average farm size. The pace and procedures of restructuring varied considerably from one country to another. However, a common feature is the unforeseen complexity of this transformation process, and the associated difficulty of “re-inventing” farming systems based on individual property and management. One important reason for these difficulties relates to the fear of many rural households of the switch from a protected environment to a competitive world of uncertainty and risk, in which many institutions and support services are yet to be established. As a consequence, even though land is officially privatised in many countries, the new farming systems are far from being established on the ground.

One of the consequences of the land distribution process in the Region has been the fragmentation of farmland. Farmers were restituted or assigned land in the form of numerous small plots, often with various soil qualities as well as various perennial crops. In most countries, land titling is lagging behind schedule and property rights remain unclear (World Bank 2000b). As a consequence, farmers are not able to use land as collateral.

The deteriorating economic situation during the transition period, the restructuring of state and collective farms which included the discharge of surplus labour and the absence of employment opportunities in rural areas, resulted in substantial rural-urban migration, especially of younger and skilled people. As a consequence, the average age of rural populations has increased and there is considerable hidden unemployment.

Figure 2: Transformation of agricultural production structures

Source: Adapted from Thiele 2000.

The evolution of the farming systems, which results from these changing socio-economic, institutional and policy factors, is summarised in Table 1. Initially those systems were characterised by a large-scale production units with high external input use. However, labour productivity was low largely due to the over-employment caused by strained social functions of those large conglomerates. Due to the substantial reduction of subsidies in the beginning of transition period, production intensity sharply decreased, further contributing to decline of agricultural productivity. In many parts of the Region, the family farms, characterised by household-oriented subsistence production and low external input use, have emerged as a response to the threat of rural poverty and lack of employment opportunities in rural as well as urban areas. With the start of economic recovery in most of the countries in the mid-1990s and improved institutional support to agriculture, particularly in Central European countries, productivity started to increase. Further evolution of most of the farming systems in the Region is expected to include specialisation, commercialisation and an increase in the importance of alternative off farm activities and employment.

In much of the Region there is still a critical gap between senior decision makers’ understanding of, and the real situation regarding, the relation between policies, institutions and farm-household systems in the context of farm restructuring. On one hand this is due to the lack of adequate data and information, particularly at the farm-level.On the other hand, there is still significant lack of capacity for the effective analysis, design, implementation and monitoring of the effects of policy measures on farm performance, for which a critical mass of professionals trained in multidisciplinary and participatory methods is urgently needed, as well as improved exchange of existing information about local realities, especially between policy makers. The Farming System Approach can used in support to the revitalisation of these evolving farming systems including the development of market-oriented management and contribute to agricultural growth and poverty reduction in the Region.

AGRICULTURAL DEVELOPMENT PATHWAYS

There is substantial scope for both agricultural growth and poverty reduction, although the two are not necessarily completely inter-dependent because of, inter alia, the distribution of land. With regard to the strategies of poor households for escaping poverty, intensification holds the greatest promise on a regional scale. This section highlights some of the major challenges in the Region and suggests possible approaches and farm/household strategies (Figure 2) with regard to improved efficiency and poverty reduction.

Figure 3 Relative importance of household strategies for poverty reduction

Source:Dixon et al 2001[6]

The potential for production intensification and overall productivity improvement through better technologies, provided that support services are adequate, is generally relatively high and thus the intensification of family farms can contribute to increased competitiveness and poverty reduction. However, this should proceed with caution as many farmers in Western Europe, after 40 years of intensification and specialisation, are facing surpluses, environmental damage and the breakdown of rural communities. The maintenance of productivity gains requires attention to sustainable resource management. Solutions to contain further degradation and develop sustainable systems, particularly on-farm, through the establishment of participatory management systems are being successfully developed in several countries. The farming systems approach needs to be incorporated into agricultural research systems. Admittedly, there are still only few examples of successful participatory technology development in the Region, and the current evidence is that participatory research takes time and significant technical assistance in order to be successful. Improved infrastructure, equipment and training are essential.

Because of its importance for long term competitiveness, as well as for poverty reduction, farm restructuring needs to be completed in order to enable the increase of farm size. Where restructuring has been slow, governments may need to give more emphasis to market based land reforms, as well as the provision of both agricultural and social services. Even where operated farm size has increased, the land tenure system often needs to be improved, including: land administration functions that are generally provided by the public sector in developed market economies; including registration, plus valuation and planning – together with support for their associated institutions. It also includes capacity building related to the appropriate professional skills and professional institutions that are associated with these and other activities related to land markets in the private sector.

Another source of poverty reduction is enterprise diversification, for which lack of appropriate farm-level information, human resource capacity and marketing are one of the major bottlenecks. At policy level, while price and trade policies will need further attention and improvement, understanding the workings of informal barriers to trade – and how these could be lowered – is equally important. Policies should also consider addressing legal impediments to market development, the need to improve quality by inter alia promotion of standards, and favouring the emergence of new types of private smaller scale processing industries. Barriers to entry and growth of new enterprises frequently exist in contravention of national legislation and policy declarations, and are linked to established power groups unwilling to see the evolution of systems outside their control. Farmers lack knowledge of market opportunities, prices and standards and production technologies. Strengthening local institutions, including the development of producers’ and professional organisations that could improve the flow of information, will also be of the utmost importance in trying to encourage and support the development of new marketing structures.

CONCLUSIONS

There is substantial scope for both agricultural growth and poverty reduction in the Region. Although transition is at different stages across the Region, substantial headway in the creation of small family farms has been made in some countries of Central Europe, notably those with the prospect of EU accession. Further evolution of most of the farming systems in the Region is expected to include specialisation, commercialisation and an increase in the importance of alternative off farm activities and employment.

The future of agriculture in most of the countries is likely to be associated with farming systems characterised by small size and private or family ownership. The development of agricultural production structures is hampered by institutional weaknesses including the shortage of information, the lack of implementation of policy measures to improve farm performance (including credit, farm diversification and intensification) and above all, the lack of structural adjustments, advisory services and proper training. A Farming System Approach - which should recognise the role and importance of diversified and competitive farming systems for the national economy - would assist in focusing interventions that would contribute to agricultural growth and poverty reduction in the Region.

With regard to agricultural development pathways for escaping poverty, production intensification holds the greatest promise on a regional scale, followed by increase in operated farm or herd size. Although hampered by contravention of national legislation and policy declarations, and the interests of established power groups unwilling to see the evolution of systems outside their control, enterprise diversification is a promising path for poverty reduction, particularly for small scale farmers. The challenge is to provide an enabling environment involving public-private partnerships, building of local linkages and institutions supporting the development of new marketing structures, innovation and investment in agricultural knowledge-based technologies aiming at improving the flow of information between actors to support diverse livelihoods.

References

Dixon, J. and A. Gulliver with D. Gibbon. 2001. Farming Systems and Poverty: Improving livelihoods in a changing world, FAO and World Bank, Rome, Italy and Washington, DC, USA.

Doppler, W. 1994. ‘Farming Systems Approach and Its Relevance for Agricultural Development in Central and Eastern Europe’, in J. B. Dent and M. J. McGregor (eds), Rural and Farming Systems Analysis: European Perspectives, CAB International, Wallingford, Oxon, UK, pp. 65-77.

FAO. 2000. Agriculture Towards 2015/2030, Technical Interim Report, Rome, Italy.

Frohberg, K., J. Fritzsch & C. Schreiber. 2001. Issues and Trends in Agricultural Development in Transition Countries, IAMO Comments on FAO’s AT2015/2030 Projections, Institute of Agricultural Development in Central and Eastern Europe, Halle (Saale), Germany.

Gatzweiler, F., Sipiläinen, T., Bäckman, S. & Zellei, A. 2001. Analysing Institutions, Policies, and Farming Systems for Sustainable Agriculture in Central and Eastern European Countries in Transition, CEESA Discussion Paper No. 2/5/2001, Central and Eastern European Sustainable Agriculture Project, Berlin.

Tanic, S. & F. Dauphin. 2001. Global Farming Systems Study: Challenges and Priorities to 2030 - Regional Analysis Eastern Europe and Central Asia, Rome, FAO.

Tanic, S. 2001. Individual Farms in CEE: From Structural Adjustment to Family Farm Livelihoods, FAO Workshop on Individual Farms in Central and Eastern Europe: Issues and policies – Proceedings, September 28-29, Budapest, Hungary.

Thiele, H. 2000. Synthesis Study on the Impact of Structural Adjustment on Family Farms in Central and Eastern Europe, Draft manuscript.

World Bank. 2000a. World Development Indicators 2000, Washington, DC, USA.

World Bank. 2000b, Structural Change in the Farming Sectors in Central and Eastern Europe, Lessons for EU Accession - Second World Bank/FAO Workshop, June 27-29, 1999, Technical Paper 465, World Bank, Washington, DC, USA.

Corresponding author:

Stjepan Tanic, Farming Systems Development Officer, FAO Sub-regional Office for Central and Eastern Europe, , Tel.: + 36 1 461 20 11, Fax: + 36 1 351 70 29

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Table 1: Principal characteristics and trends of the major farming systems in ECA

Source: FAO expert knowledge (see Tanic and Dauphin 2001).