In recent years, agriculture has turned from one of Romania's biggest assets in the region to one of its main liabilities. The country went from being one of Europe's major grain suppliers to becoming a net-importer of agri-food products following European Union accession. The administration is currently trying to reverse things.
“I have set a goal for myself and that is to turn Romania into the second biggest farming power in Europe,” said prime minister Calin Popescu Tariceanu last week while promoting the National Program for Rural Development. By 2013, Romania will have about EUR 10 billion to invest in the sector, he added, and the funds “could change the face of local agriculture and village for the best.”
The prime minister had previously met banking sector representatives and spoken about the funds available to Romania until 2013. Aside from the EUR 8 billion coming from external funding, the administration will also provide EUR 2 billion in co-financing to be used in modernizing the sector and developing rural areas.
“Banks are the best channels there are to distribute these funds,” said the prime minister. He added that government authorities negotiate with banks advantageous lending terms for potential projects, so that each farmer can access
European funds in the best conditions.
Tariceanu said the government would introduce a series of facilities – in the process of granting loans and guaranteeing them – based on the success of the SAPARD
program and the Farmer Program.
“We want to keep using these best practices and give agriculture a chance at actual modernizing,” said Tariceanu a few weeks ago.
Since then, the Agency for Payments and Interventions in Agriculture (APIA) has signed a convention with three of the biggest banks in the system, BRD-SocGen, Alpha Bank and CEC, to grant loans to farmers up to the point when they acquire their subsidies from the EU. Farmers can thus borrow from the banks as much as 75 percent of the EU subsidy they will get later on. The loans will be granted based on receipts from APIA estimating the amounts borrowers will acquire from community funds.
“Considering the findings of research conducted by APIA as regards the pieces of land registered for direct funding, we estimate that the total funds needed in the coming period will amount to approximately EUR 200 million,” said Traian Traicu, spokesperson for BRD-Societe Generale.
The lending process will be speedier than the application process farmers need to go through if they want to access community funds. It basically aims to provide timely funding to farmers who cannot put their activities on hold until the EU financing comes through and must plant their spring crops. The bank loans will temporarily replace the EU funding, which is why they will come in the form of short-term credits with maturities of a few months only.
“This financial instrument allows farmers who own more than ten hectares and have asked for funds per hectare to receive a downpayment. They will pay back this sum when APIA pays the subsidiary. The use of the instrument will not be limited to this year and could be extended to future years as well,” said agriculture minister Dacian Ciolos.
Subsidies go as high as EUR 50 per hectare plus complementary payments from the state budget. They correspond to the 2007 crop year and total EUR 440 million.
“BRD branches throughout the country will soon be able to handle loan applications from beneficiaries of direct subsidies. We will promote the new product in all units of our network, without discriminating between urban and rural parts of the country,” Traicu added.
CEC said it would grant the loans at a 12 percent interest rate, all costs included. The interest rate will not be covered by state subsidies.
CEC's new product for farmers is available in branches as of March 20, said bank president Radu Gratian Ghetea. He added that the average period needed for processing credit applications would be roughly four days since they were submitted.
CEC has a special relationship with and appeal to farmers, since a good part of its 1,400-branch network is spread in rural areas, closer to their homes than any other bank. Aside from that, CEC is a familiar bank that has been around the longest to which people, especially those living outside cities, are accustomed.
The lender has made farmers one of its priorities this year and said it aims to provide some 20 percent of the financing for agriculture by 2011. As it is, this type of loan makes up roughly 12 percent of the bank's portfolio, according to statistics at the end of 2007.
Banks aside, the administration's determination to get agriculture back on the right track does not come as a surprise given its disastrous record in previous
In 2007, agriculture had the poorest performance compared to all other economic sectors, according to the National Statistics Institute (INS).
The failure of local farming took its toll on the national economy, especially on account of the drought which devastated one million hectares of crops and affected a total of four million hectares. The poor performance of agriculture last year was comparable to that in 2005 when a string of floods damaged vast areas of land and cereal production plunged 13.2 percent against 2004.
As rarely seen before, last year grain imports were estimated to have reached a total of 400,000 to 500,000 tons, according to the president of the Romanian Milling and Panification Owners Association (Rompan), Aurel Popescu. The amount is about 16 percent of the entire 3 million-ton production last year, a considerable sum given that not long ago Romania was one of Europe's major grain suppliers. In the past few years it has turned into a net-importer of agri-food products following European Union accession. In the first half of 2007, Romania recorded a EUR 1.05 billion deficit in the trade with agri-food products, according to INS statistics.
Aside from emptying farmers' and bread producers' pockets, the loss also affected the growth of GDP. Total damages on account of the drought amounted to EUR 400 million, which represented about 0.4 percent of the GDP in 2007, according to the National Forecast Commission (CNP).
All things considered, it becomes apparent why the state cannot afford to let the EUR 8 billion worth of funds from the European Union for this sector go to waste. Especially since it has a track record of doing just that.
Last year, Romania attracted merely three percent of the European funds available for the
farming sector, according to data recently published by the central bank.
Of the EUR 760 million available for investments in agriculture, just EUR 20 million was actually used, which brings down Romania's absorption degree to well below the levels seen in the Czech Republic, Hungary and Slovakia, found the study. Romania's 21 percent rate is half the size of Hungary and Poland's 43 percent.
This array of factors was probably decisive in prompting the administration to facilitate farmers' access to funding and take hurried steps in this direction. Money worries now partially aside, one can only hope that the lack of rain will
not wash away farmers' hopes of making up for last year's crop dearth.
By Ana-Maria David