Local agriculture ploughs on without development priorities

Agriculture and rural development projects submitted for EU financing have in some cases surpassed allocated funds by as much as four and a half times over, but despite increased interest from Romanian farmers, the actual absorption rate reached only 47 percent in April. Johannes Becker, the owner of Becker Consult, told BR about the situation and what Romania’s priorities for the 2014-2020 Common Agriculture Policy (CAP) should be.

By  Simona Bazavan

How do you comment on the absorption rate of agricultural EU funds that Romania has achieved so far and how could it have been higher?

Generally, agriculture performed better regarding the absorption of EU-funds than other EU programs. For the 2007-2013 programming period, Romania had access to EUR 10.1 billion for rural development. At the end of April, the overall absorption rate reached 46.9 percent, meaning EUR 4.7 billion in payments were made up to that date. Nonetheless, Romania still has to absorb approximately EUR 5.4 billion, which is more than half; therefore it is very likely that some of the EU funds will be lost.

The inability to take out loans, long evaluation periods, and complicated and bureaucratic procedures have meant that only a quarter of the submitted projects have actually reached the stage of signed funding agreements, despite the costs already incurred in developing them. Even fewer projects have been implemented correctly and received reimbursements. From our experience, greater interaction between monitoring officers and beneficiaries can provide excellent results in preventing and correcting problems, which ultimately results in higher reimbursements.

What have the most popular funding measures been so far?

The most popular by far have been measures 322 “Village renewal and development”, 312 “Support for business creation and development”, 125 “Infrastructure related to the development and adaptation of agriculture and forestry” and 121 “Modernization of agricultural holdings”. Each of these measures attracted great interest both from the public and private sector. The projects submitted until now for these measures have exceeded the available budget for the whole programming period by between 193 percent (measure 121) and 342 percent (measure 322). The absorption rates for the four measures range from 17.1 percent (measure 125) to 62.0 percent (measure 322). Even taking into consideration that some projects are still being implemented and have not yet submitted reimbursement claims, payments under these four most successful measures cannot cover the whole allocated budget. The most dramatic situation can be seen for measure 125, which attracted 1,700 projects (327 percent of the allocated budget) and which has a current absorption rate of 17.13 percent. The problem with measure 125 seems to be incorrect execution of projects or project abandonment due to lack of funding.

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Discussions over EU funds focus almost entirely on absorption rates and thereby quantity, and less on quality. Do you think the measures and types of projects through which EU funds are available for Romanian farmers have really been addressing their needs as well as those of the sector as a whole?

The main question – which has still not been answered – is in which direction Romanian agriculture will develop in the future: do we want to see more large farms working with efficient machinery and create high output, do we want to support family farms that keep rural areas alive or do we want to keep small semi-subsistence farms alive to give the poorest people in rural regions some kind of occupation and reduce social security costs? Which of these targets has priority, how should they be mixed, and – first of all – how can we reduce poverty in rural regions in a sustainable way and make these regions more attractive? In the past few years all of these issues have been addressed more or less randomly, without clear priorities. I hope that for the next financing period, 2014-2020, better defined policies will lead to better defined programs.

More technically, what must be underlined when it comes to quality versus quantity is the significant difference between absorption rates and results achieved. Generally, the success of the National Rural Development Programme (NRDP) is quantified in terms of absorption rates and not in terms of results achieved. For example, the success of measure 121 which funds the modernization of farms – an important aspect for the development of agriculture – is measured only in terms of EU funds paid out to farmers; at the moment it is approximately 43 percent of the total budget, which is not bad. The initial scope of the measure, however, was to support 44,458 farms through the modernization process. At the end of April 2013, there were 1,993 beneficiaries for measure 121, which represents less than 4.5 percent of the initial target. From this perspective I would qualify the program as a failure. The same is true for most of the measures in the NRDP, though there are exceptions, such as measure 112 “Support for young farmers”. This has reached 9,522 beneficiaries, or 70 percent of the target.

In my opinion, the programs in the NRDP responded to farmers’ needs, but the support reached too few of them. The programs seem to focus on larger farms, which have the financial capacity to develop investment projects and receive loans to co-finance their projects. Too few smaller farms – which constitute the majority of Romanian agriculture – could make use of the funds.

What do you think the missed opportunities for Romanian agriculture have been, as a result of the poor management of EU funds?

Are rural regions significantly better developed today than in 2007? I doubt it. There has been an improvement, but things are moving slowly. We have to create more job opportunities for young people to make them stay in rural areas. A few new tractors and combines are good for agriculture, but politicians have to look beyond that. They have to assist young people to start healthy businesses in rural areas. Some of the programs – also national programs – go into this direction, but we need substantially more of these.

Even if the NRDP is doing better than the operational programmes financed through the structural funds in terms of management, there is also a lack of confidence among potential beneficiaries and sometimes even a declining interest in attracting EU funds. They are regarded as increasingly bureaucratic and difficult to obtain, projects take a long time to prepare, submit and evaluate, and by the time the client reaches the execution phase, the context has changed.

For farmers it should be possible to receive EU funds for smaller projects without requiring the help of a consultant. Procedures should be simplified so much that farmers can complete the forms by themselves. And they should not have to wait for eight months or a year until the authorities come to a verdict and they can finally start their project. Whatever they need, they need it quickly. Once approved, there should be greater flexibility for changes in the projects during implementation.

What do you think should be Romania’s priorities in the CAP 2014-2020 negotiations and what sectors or development goals should become a priority?

Both the CAP and the Cohesion Policy are currently under reform so as to improve and align them to the Europe 2020 strategy. In this context, at EU level, the rural development policy will focus on increasing competitiveness and promoting innovation. The draft regulation for the new rural development policy, published in 2011, defines a set of thematic sub-programmes that can be included by Member States in their new rural development programmes. Many of the measures funded in the 2007-2013 programming period are still considered priorities under the new programs. In reality, many of the priorities Romania set for itself in the past are priorities that were also included in the current programs. This certainly shows that although progress has been made in modernizing and reforming Romanian agriculture, there is still much to be done.

Besides deciding on what type of agriculture Romania needs – few large farms or many smaller but more flexible farms – the new programme should also take into account that Romania’s agriculture cannot solely be based on cereals and energetic crops, which have received the largest support between 2007 and now. Romania still imports most of its fruit and vegetables and niche products, such as organic and traditional food, are still not well represented.

Young people in rural areas especially need to have local and sustainable alternatives to agriculture as a source of jobs and income. Investments in local non-agricultural businesses – which means more than bed & breakfasts, hotels and restaurants – should receive more attention under the new program.

What measures could still be implemented so that Romania is better prepared for CAP 2014-2020?

Romanian agricultural policies will have to pay attention especially to the sectors where Romania is most vulnerable, to become independent from imports. Meat and milk, dairy products, and fruit and vegetables are sectors that are underdeveloped because the conditions are less than ideal. If the framework for these sectors can be improved, then they will become more attractive for farmers. Currently it is difficult to be profitable for farmers producing milk, tomatoes or potatoes.

Regarding the subsidies, from our experience smaller projects seem to have a stronger impact than bigger investment projects, which often suffer from delays or cash flow problems. Measure 112 “Support for young farmers” is an excellent example of the results, both in terms of output and in terms of absorption rates, which can be achieved through smaller projects. At the end of April, the measure had funded 70 percent of the intended target of farmers, and had a 63 percent contracting rate and a 45 percent absorption rate.

Another way to boost absorption rates is to improve the dialog between monitoring officers and beneficiaries. Most of the problems that occur during the project implementation phase can be prevented, if there is a constructive dialog between the monitoring officer and the beneficiary. However, usually this communication is not as efficient as it should be. The focus should shift from identifying problems in implementation to helping beneficiaries prevent them in the first place.

simona.bazavan@business-review.ro