Agricultural and Rural Transformation in Europe

Simone Schiller

2015

Abstract
AI

This report analyzes agricultural and rural transformation in Europe, focusing on the decline of the primary sector compared to secondary and tertiary sectors due to economic, ecological, social, and political factors. It explores the opportunities and challenges presented by these transformations, particularly in developing regions, and evaluates existing policies and frameworks while considering the limitations of relying solely on secondary data for analysis.

Figures (44)

Structure of the economy (% GVA by branch) - 2010 - NUTS 3

Figure 1 Structure of the economy in the EU-27, 2007 and 2010. (Source: European Union 2013) Table 1 Structure of the economy (% GVA by branch) - Member State values (Source: (European Union 2013)

;ompared to EU-15 and EU-N12 countries, sector shares vary significantly. Predominantly rural reas in 2010 accounted for 4% in EU-15 and 7% in EU-N12, whereas the secondary sector ccounted for 29% and 39%, respectively. Thus, the tertiary sector (67%) in the EU-15 is stronger han in EU-N12 (54%). In general, the tertiary sector profits from losses in the secondary sector in nost countries, which might be due to the economic crisis. A considerable change between the wo sectors has become obvious for example in Ireland, where the secondary sector lost 6.7% and he tertiary sector gained 6.6% (European Union 2013).

Figure 2 Key events in policy development and enlargements since 1957. (Source: authors, based on European Commission 2009a: European Commission 2013a) (diagram based on an unpublished draft by Lukas Zagata)

Figure 3 Historical development of the Common Agricultural Policy (Source: European Commission 2015a)

Figure 4 Objectives of EU Regional Policy (Source: (Bundesministerium fiir Bildung und Forschung 2013) Policy shifts as a response to the impacts of rural transformation over time

Table 2 Case studies characteristics In all regions rural transformation included changes to the economic structures, and al. included changes to agricultural structures as well- though to varying degrees and in differen’ ways. The Border, Midland and Western Region (BMW) of Ireland illustrates changes to the agricultural sector and rural areas in an economy which has experienced a radical shift from largely primary sector based to a tertiary sector based economy. The Cordoba province in Spain is an example of agricultural specialization into olive oil production alongside diversification of the rural economy resulting among other in counter-urbanization. Transformation in the Panagyurishte-Velingrad region in Bulgaria has taken place most recently as a consequence of the political transition from the late 1990s onwards. The case illustrates the difficulties in adapting tc a market economy anda largely changed policy framework, with some positive outcomes in the development of the tourism sector but also still deficient availability of services of genera interest, and the situation particularly for small and subsistence farmers. Regional case studies aim to illustrate typical transformation pathways and policy responses o! rural transformation in Europe, to overcome the difficulties in establishing generalizations abou influencing factors, their interdependencies and effects caused by the complexity of rura transformation processes. Three regions in Bulgaria, Spain and Ireland were chosen to provide insights into three different typical rural transformation processes; within different, but typica European contexts constituted by varying physical, social, economic and institutional conditions Table 2 gives an overview of main characteristics of the selected regions and illustrate that they differ substantially in size, population, land use and economic structures by applying the rura. typologies of EU-LUPA and EDORA (see 2.2 for further explanations). As the European policy framework has major implication for rural transformation it is important to note that the three countries have accessed the EU at different points in time: Ireland has become a member of the European Community in 1973; Spain in 1986 and Bulgaria in 2007.

Table 3 Economic sector structure for Pazardzhik district 2013 (Source: National Statistics Institute 2014).

entrally planned economy to a market economy started. Huge changes (privatization, igriculture and industry restructuring and liquidation) occurred in all sectors and all spheres of yeople’s life, also in the study region. In 1997 Bulgaria established a currency board, which, up to he present, pegs the Lev to the Deutsche Mark and since 2002 to the Euro.]. In 1995 Bulgaria submitted its application for EU membership, in 2000 accession negotiations were opened and at he end of 2004 they were concluded and Bulgaria became EU member in 2007. With this, 1umerous changes commenced and were implemented, suchas the adaptation of legislation and idministration or ensuring proper implementation and functioning of EU policies. For rura reas, the most important EU policy field is the CAP with the implementation of Rura Development Programmes (RDPs), and the Special Pre-Accession Programme for Agriculture and Rural Development (SAPARD - a program to help Central and Eastern European countries in idjusting rural structures and in implementing CAP regulations). Some of these changes and the way they were implemented are important and still influence development of rural areas. The nost important ones are: a radical land reform, leading to a high fragmentation of land, which till limits the possibilities of farm enlargement; the liquidation of former cooperatives, listributing land and non-land assets, including livestock, to former owners; and the abolishment »f the strong state control of farm prices and foreign trade with agricultural and food products. Before the recent economic crisis starting in 2008 the overall economic situation in the country and in rural areas had significantly improved, manifested e.g. in the increase in average household income from 4,416 lev in 1999 to 12,163 lev in 2014 (see Figure 6), the overall decrease of unemployment from 16.2% in 2000 to 5.6% in 2008, or the general increase of the GVA (see figure 5). At present the whole country is facing a particularly difficult situation: economic instability, high levels of unemployment (13% in 2013), bankruptcy of the fourth biggest bank, and decrease of the foreign investments. Also, political instability during the past three years (five governments

Figure 6 Income per capita in total lev and as percentage of EU-27 average for rural and urban areas 1995 to 2014. Sources: National Statistics Institute, EUROSTAT. Demographic change: In the country as a whole, the deterioration of the population’s age structure combined with emigration (especially of the active population and young people) is a factor that also affects the study region. Many of the unemployed are either without the necessary qualifications, or are not flexible enough to work in another field of employment. This is a very important migration factor, in addition to regional differences in working conditions and wages that stimulate further outmigration from small communities, mainly to towns outside the region and abroad (see Figure 23 in the Annex). Part of the migration is for education, training and self- fulfilment in larger centres, as many young people do not return after graduation. In the region and it’s municipalities the aging of the population also affects the redistribution of labour resources across age groups, with an expected significant overall reduction of labour resources: the regional coefficients of demographic replacement are similar to those in the country, Le. for every person leaving working age, only 0.63 are entering working age (LMA 2006; VMA 2013; BMA 2014; SMA 2014; StMA 2014).

Table 4 Main indicators of agricultural structures for Bulgaria 2003, 2010 and 2013. Source: Ministry of Agriculture and Food Database. Macro-economic indicators of Bulgaria indicate an overall improvement since accession to the =U, e.g. in terms of employment, GDP and the purchasing power of the population. However, ‘ural areas faced a large outmigration particularly in the years following accession - leaving them vith an education structure more unfavourable for economic development. Households in the ‘eport an increased income level of 63% of the monthly salary but it is mainly due to the increase of payments received by staff of the state/municipality administration and extractive industries. The lowest levels of salaries are in agriculture, tourism and the trade sectors where the income is 30-35% lower than the regional average. In the region, the main source of household income is wage (40% of the income) but the share of income from pensions and from subsistence farming rctivities is still high, respectively 21% and 19% (LMA 2006; PMA 2013; VMA 2013; BMA 2014; SMA 2014; StMA 2014).

Table 5 Structural data for the agricultural sector in Pazardzhik district and Panagyurishte-Velingrad region 2003 and 2013.

Table 6 Economic Sector structure for Cordoba, Andalusia and Spain in 2012 (%) (Source: (Instituto Nacional de Estadistica 2012). From the point of view of employment, the sector’s importance is even more pronounced since in the province it represents 10.3% of the total employees as compared to 7.4% at regional level and 4.2% nationally. Social capital is well developed as there is a large and heterogeneous associative network encompassing, amongst others, cooperatives, unions, irrigation communities, professional organizations, and rural development groups. Cordoba is a Spanish province (NUTS 3) located in the south of the Iberian Peninsula, in the north-central part of the Autonomous Community of Andalusia (NUTS 2). It has a total surface area of 1,377,131ha, representing 2.7% of the total area of Spain and 15.8% of Andalusia. In 2011, it had 799,402 inhabitants (Instituto Nacional de Estadistica 2011) with a population density of 58.5 inhabitants/km?, lower than the Spanish average (93.17 inhabitants/km2). A characteristic of the productive sector’s structure is the importance of the agricultural sector and the industrial sector linked to agri-food. In 2012, the agricultural sector in Cordoba represented 5.9% of the province’s total Gross Value Added (GVA), while this meant 4.4% in Andalusia and 2.5% in Spain (see Table 6).

Figure 7 Selected Indicator for agricultural and economic development (1973-2012) (Sources: CSO 2012; DAFM 2013; UNCTAD 2013, CSO 2014b, 2014a; Worldbank 2015) These global and national processes as well as internal factors and dynamics have contributed to changes observable in several dimensions and on several scales: in the economic dimension, shifts in the sectoral composition of economy and employment are documented on national and regional levels; on farm or enterprise level a decline of farm numbers and an increase of average farm size, a growing share of non-agricultural income of farm owners, a growing factor productivity and increased vertical organization of value chains can be shown. In the social dimension, structural change manifests in demographic development and especially migration trends, and in the political dimension in the changes of institutional structures and political organization. All of these factors do interact with and influence each other, and it is difficult to establish simple causal relations between them.

During the 1990s, farm numbers decreased with a higher tempo than in the 1970s and 1980s, from 170.000 in 1991 to 128 in 2007, while average farm size grew from 26 to 32ha (DAFM 2013, Table L2). Farm size in the BMW region increased between 1991 and 2005 by about 30%, compared to only 17% in the South & East region. A major factor that influenced the increasing farm sizes particularly in the 1990s were local policies (Crowley et al. 2008). During the 2000s, the decline of farm numbers and the increase of farm sizes slowed down, with farm numbers declining by 10% in the 2000s compared to 17% in the 1990s. Figure 8 Subsidies as % of Operating Surplus of Farms, National Level, 1990-2011 (Source: DAFM 2013, Table G7)

Figure 9 Contribution of Agriculture, Forestry and Fishing to Regional GVA (2000-2012) (Source: CSO 2015b)

Table 7 Farm Numbers by Size Category, 1975-2010 (Selected Years) in thousands*™* (Source: (DAFM 2013)

Table 8 Gross value added in rural regions, 2010 (% share of total value added) - (Source: Eurostat statistical yearbook 2014)

Figure 3: The EDORA Cube — a 3 dimensional framework for anal Note: IA = Intermediate Accessible, IR = Intermediate Remote PRA= Predominantly Rural Accessible PRR = Predominantly Rural Remote

Dijkstra-Poelman Urban-Rural Typology 2011

EDORA Performance Typology 2013

Expenditure by Member State in 2013 (million EUR) Figure 18 Expenditures by headings and Member States (2013) (Source: European Commission 2014a)

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Table 10 Types and sub-types of urban-rural Interaction, based on the OECD classification (Source: Copus 2013)

Figure 19 Implemented payments on ‘Preservation and management of natural resources’ by Member States (2013) (Source (European Commission 2014a)

Source: DG Agriculture and Rural Development estimates based on a modelling exercise. Table 11 Utilised Agricultural Area devoted to energy and biomass crops in the EU-27, 2004-2011.( Source: European Unior 2013) Table 12 Other gainful activities for agricultural holdings, 2010. (Source: Eurostat statistical yearbook 2014)

Figure 21 Land use types by municipalities in the Panagyurishte-Velingrad region (%) in 2013. Source: National Statistics Office 2014

Figure 22 Migration balance in Panagyurishte-Velingrad 2002 and 2013. Sources National Statistics Institute 2014

@ from/to urban Yuzhen tsentralen m from/to urban other regions ™ from/to rural other regions

Figure 24 Agriculture Gross Production Index, years 2004-2006 = 100. Source: FAOSTAT 2015 Figure 23 Migration balance of urban areas in the Yuzhen tsentralen planning region (NUTS2). Source: National Statistics Institute.

Figure 26Contribution of Agriculture, Forestry and Fishing to regional GVA (2000-2012). (Source: Central Statistics Office 2015, Table RAA01)