12/06/2003 - The economic and social upheavals caused by technology-driven changes to the agro-food industy and by the exodus of labour from the countryside have created enormous challenges for European policy makers seeking to develop vibrant rural environments. Providing alternative employment opportunities in rural areas requires the careful balancing of a range of macro-economic, social, regional, and sectoral policies. All these issues were debated at a seminar on agriculture and rural development in the Baltic countries organised by the OECD and the Estonian Ministry of Agriculture in Tallinn on 10-12 June 2003.
Opened by Tiit Tammsaar, Estonian Minister of Agriculture and Ken Ash, the OECD’s Deputy Director for Food, Agriculture and Fisheries, the Seminar on Agriculture and Rural Incomes, Labour Mobility and Rural Development Policies in Estonia Latvia and Lithuania brought together government officials, industry representatives, and a range of international policy experts.
The main findings to come out of the three-day seminar were as follows:
- The rural income and employment situation in the three Baltic countries is different from other EU and OECD countries and requires tailor-made policy solutions.
- Problems of agriculture and rural unemployment, incomes and mobility are complex and the causes need to be better understood. Governments need to address the causes of the problems and not the symptoms.
- Agriculture and social policies are not the best solution. Rural development lies in developing human and natural resources.
- Successful rural development involves taking a broad approach – integrating rural activities into the broader economy; linking human and capital markets; taking into account rural infrastructure and special effects such as structural and size differences between regions.
- Government intervention needs to address the problems by facilitating adjustment and not by trying to inhibit the process.
- EU accession will provide new opportunities, but will not solve all the problems in rural areas. National governments must take the initiative to design their own flexible strategies, taking advantage of the assistance available from the European Union, Food and Agriculture Organisation, etc.
- It is essential to continue to expand the policy dialogue with, for example local stakeholders, other countries and the private sector.
Background: Issues at the seminar
Seminar participants discussed trends in farm incomes and the growing contribution of earnings from non-farming activities. They noted that measuring farm household incomes is becoming increasingly difficult as farms have become more heterogeneous, while comparable data remains scarce and differences in the composition of households significant. These difficulties make cross- country comparisons problematic.
In the Baltic region, farm household income fell sharply during the transition period. However, in recent years average farm household income has risen in Estonia and Latvia as many farms have grown larger, so boosting output and labour productivity. The sources of income also are becoming more diversified with off-farm employment and social transfers representing a larger share of total income. In Lithuania rural poverty is a serious problem. This is because of the higher dependence on agriculture, slower transformation process, the nature of land restitution and the fact that there are fewer opportunities in other sectors.
The continuing outflow of labour from agriculture is causing high rural unemployment. With stronger economic growth and investment in the Baltic region, employment opportunities are likely to increase primarily in urban areas with positive spillover effects on rural areas. But, several factors may continue to inhibit labour mobility across the region.
Because of their generally low level of education many of those leaving agriculture have limited employment opportunities in the general labour market. In all three countries rural unemployment rates are above 50% in certain areas. Of particular concern is the rapid rise in joblessness among young people. There is, however, an increasing focus on developing a more coherent policy approach to include agriculture, rural development, education and training in order to more fully integrate the rural unemployed (unskilled, young and long term unemployed) into the labour market.
An array of short-term measures is being implemented in the Baltic countries to overcome the social effects of high unemployment and poverty. In the longer term, the solution to these problems depends on resolving the underlying causes such as the lack of infrastructure, the absence of market institutions, the need for access to information, and concerns regarding the distribution of incomes in rural areas. A combination of dynamic local initiative and top-down approaches are important elements in designing rural strategies that reduce income and welfare disparities both between the countryside and the city and within rural areas.
Traditional rural development measures in the European Union have tended to centre on agriculture and to concentrate on income redistribution and project support. However, the situation is different in the Baltic countries where the standard of living is lower and the range of activities in rural areas is less diverse. Moreover, there are also wide differences between Estonia, Latvia and Lithuania, as reflected in the range of national rural and regional policies being implemented. Debate at the seminar focused on the success of the EU’s LEADER programme in raising the income of households in poorer regions of member countries. Most of the funding of this initiative is for non-farming activities in rural areas. It was also recognised that while the LEADER programme may prove to be an important stimulus, it should not be seen as a quick-fix for all rural problems in transition countries, but, rather as a long term investment in capacity building for development.
For further information, please contact Michael Ryan (tel: 33 1 45 24 85 58)
Agriculture and Rural Development in Baltic Countries, Seminar 10-12 June 2003, Tallinn, Estonia