IDARA WP 12:
STRATEGY FOR INTEGRATED DEVELOPMENT OF
AGRICULTURE AND RURAL AREAS
IN HUNGARY
Prepared in an international Vth framework project supported by the European Commission
Coordinated by the University of Bonn
With the co-operation of the following academic institutions:
Budapest University of Economic Sciences and Public Administration, Hungary
Imperial College, London University, United Kingdom
National University of Galway, Ireland
Research Institute of Agricultural Economics, Czech Republic
University of Warsaw, Poland
Revised version, utilised the comments of a seminar with agricultural policy makers held at
the Budapest University of Economic Sciences and Public Administration,
on 12 November 2002
BUDAPEST 2002
1
INDICE
1. Forewords
4
2. Situation description – Diagnosis
6
a)
Transition process ........................................................................................................ 6
Institutional framework in a historical overview ..................................................... 6
Regional and rural development in a historical overview ........................................ 7
b)
New framework conditions with EU accession ........................................................... 8
Regional- and rural development after 1990 ............................................................ 8
Rural- and regional development issues ................................................................ 10
Agri-Food Industry in the Hungarian Economy .................................................... 11
Role of Food-industry in the Development of the Agriculture and Rural Areas ... 31
3. Key issues – identifying priorities
36
a) National level ................................................................................................................. 36
b) Regional level ................................................................................................................ 40
Rurality in Hungary ............................................................................................... 40
Rurality and the statistical system .......................................................................... 41
Why on sub-regions’ level? ................................................................................... 42
The first classification of sub-regions .................................................................... 43
Analysing the situation from the first classification .............................................. 44
Analyses of rural areas by five sub-region classes ................................................ 46
4. Measures contributing to solving problems in priority areas
a)
48
Scenarios – structured in policy areas breakdown ..................................................... 48
Income diversification............................................................................................ 48
POLICY SIMULATION ....................................................................................... 51
Comparative analysis of agricultural policies by fapri, oecd and idara forecasts .. 52
Trend based expert opinions .................................................................................. 57
Results of the simulation........................................................................................ 59
b)
Strengths and weaknesses .......................................................................................... 64
Main results of the Hungarian case-studies ........................................................... 64
c) Experience in EU15 ......................................................................................... 72
5. integrated strategy
a)
86
Optimal Policy Mix ................................................................................................... 86
Policy proposals for Hungary ................................................................................ 86
b)
2
Institutional setting .................................................................................................... 93
The present institutional framework of rural and regional development – division
of responsibilities ............................................................................................................... 93
Actual situation of the Hungarian implementation system of EAGGF ................. 98
Co-ordination of the development of agricultural administration system ............. 99
Main tasks of the EAGGF Paying Agency ............................................................ 99
Delegated tasks and the tasks of the paying agency system ................................ 100
Abbreviations ................................................................................................................... 103
6. Literature
103
7. References
103
Appendix: IDARA plus: QA for agricultural sector models ........................................... 106
Appendix: Check list for iterative modelling................................................................... 107
Appendix 1: Population and settlements in Hungarian subregions ................................. 108
Appendix 2: Active earners and unemployed people in the Hungarian subregions ........ 109
Appendix 3: Public utilities in the Hungarian subregions ............................................... 110
Appendix 4: enterprises in the Hungarian subregions ..................................................... 111
Appendix 5: Trade, tourism and services in the Hungarian subregions .......................... 112
Appendix 6: Agriculture in the Hungarian subregions .................................................... 113
Appendix 7: Non-agricultural activities in the Hungarian subregions ............................ 114
3
1.
FOREWORDS
The aim of this research project is to identify key problems and discuss strategies for an
integrated development of Agriculture and Rural Areas in the first group of CEEC accessing the
EU. The research has started in February 2000, and will be closed in January 2003. The cooperating institutions (indicated in the cover page) are elaborating the project. The project has three
main topics: i) impact of rural development policy (led by the National University Galway), ii)
competitiveness, non-agricultural income and farm enterprise diversification (led by the Imperial
College, London University) and iii) simulation model of policy implication (led by the University
of Bonn).
The research was to identify problems and device formulas for integrated development of
rural areas. At present, integrated rural development policies and especially, the supporting
institutional structures are mostly lacking. Most rural areas will undergo substantial agricultural
adjustment and this will inevitably result in an increasing outflow of labour. Agricultural
diversification can play a key role to stimulate local economic development. Finally, both the labour
outflow and the income situation of households, central to a rural development strategy, will depend
directly on agricultural production and price developments.
Against this background, and in light of these major interdependencies, this research project
has embraced a comprehensive approach. The project aims to improve the understanding of three
interdependent areas that have not been adequately addressed so far by research, namely the
identification of adequate policy measures and institutional structures for the introduction of an
integrated rural development policy in the CEEC, a thorough analysis of agricultural diversification
patterns and its potential role in rural development, and finally the development of a simulation
model that allows a comprehensive estimation of the impact of different policy measures on
agricultural production, budget and income and, in turn, its consequences for rural development
strategies.
More precisely, the combined research to be undertaken by the project will cover four main
tasks, namely:
1. Identification of key rural development problems and analysis of the most effective and efficient
policy measures and delivery structures, as well as the adequate institutional framework to
support rural development.
2. Analysis of competitiveness and diversification at farm and household levels, by compiling and
analysing data on competitiveness indicators, farm income sources and enterprise diversification
activities, which are compatible with the EU concepts. This will help, among other things, to
identify the potential of farm diversification to contribute to rural economy in the CEEC.
3. Development of a simulation model for the CEEC compatible with the EU SPEL/MFSS, that
permits EU and CEEC policy-makers to estimate the impact of a variety of policy measures on
production, consumption, net trade, income and budget.
4. Enhancement of co-operation between EU and CEEC researchers and transfer of know-how to
the CEEC with a view to support the enlargement process. To this end, CEEC partners will be
closely involved in all research activities and will be responsible for the integration of research
results (see below).
The Hungarian team was based on the Department of Agricultural Economics and Rural
Development of the Budapest University of Economic Sciences and Public Administration. Staff
members and PhD students also participate in the project. The following division of labour was
made: rural development issues by Prof. Sándor Elek, competitivity and diversification by Prof.
Gyula Módos and Prof. Maria Sebestyén-Kostyál, policy simulation model by Prof. László Pitlik.
4
Here should be mentioned that the latter issue was elaborated by the team of the St. Stephan
University, Gödöllő. The head of the Hungarian team is prof. Tibor Ferenczi.
The work could not be done by the great contribution of PhD students in all of the cooperating universities. In the Hungarian team the following participation was very significant: Ákos
Borbély, Ákos Németh and Péter Csillag (rural development), Barna Kovács, Tamás Mizik, Gábor
Harsányi and Zoltán Győrfi (competitivity and diversification), László Bunkóczi, Mária Pásztor,
István Pető and Attila Popovics (policy simulation). From foreign institutions, a great contribution
was given to the current pages by Hannah Chaplin, PhD student of the Imperial College, London
University.
The international project is co-ordinated by Prof. Wilhelm Heinrichsmeyer. The most
significant contribution was received by the following foreign partners: Dr. Udo Bremer, ing. Tanja
Möllmann, and ing. Kai Bauer from the University of Bonn; Dr. Sofia Davidova, Dr. Matthew
Gorton from the London University, Prof. Michael Cuddy and Ms S. Callanan, Dr. Tomas Ratinger
from the Czech Institute of Agricultural Economics and Prof. Jerzy Wilkin from the Warsaw
University.
5
2.
SITUATION DESCRIPTION – DIAGNOSIS
a) Transition process
Institutional framework in a historical overview
Rural development is a rather new term in Hungary, which became widely used after the
reorganisation of ministries held by the Independent Peasants’ Party in 1998.
Previously most policies, which could be termed as ‘rural’ have been managed by the
regional development administration. Still today the bulk of the policies having influence on rural
territories is managed and administered by the regional development bureaucracy. Thus the analysis
will frequently refer to ‘regional development’ policies and institutions because they too play an
important role in rural development.
During communism regional and spatial development was organised by a centrally driven,
administrative planning system. The central and the county (NUTS 3) level shared responsibilities;
however, the former controlled the power. As a consequence of the vertical planning mechanism
policies were arranged along sectoral lines. Political and sectoral objectives were superior to
regional concerns in government policies. Moreover the pervasive, command and control economic
and political regime provided a solution for certain problems itself (e.g. unemployment,
subsistence). Other concerns of today’s regional and rural policies were either completely
disregarded (environmental issues) or, conversely, the objective was the very opposite (e.g.
depopulating the small villages, eliminating rural cultural heritage). This was mainly the reason
why regional (let alone rural) policy as such was not emphasised on the institutional level.
With the Act on Local Governments in 1990, local municipalities got back their
independence, resources and responsibilities. The hierarchical system was replaced by a structure in
which there was no hierarchy between local governments of different sizes and the county selfgovernment. It was in 1990 when the Ministry of Environment and Regional Development, regional
development policies gained a separate institutional system for the first time. A Regional
Development Fund (RDF) was also created. At the same time a number of civil organisations and
NGOs were set up, such as voluntary associations of neighbouring villages, development agencies
and organisations for environmental conservation.
The next significant change came in 1996 with the introduction of the Act on Regional
Policy and Physical Planning. This legislation was assessed by the EU, and deemed the most
progressive in Central and Eastern Europe. The EU's decision was based on principles and
regulations that fulfil the requirements for accession. The legislation created a multi-level,
decentralised institutional system for regional development and initiated the creation of larger
(NUTS 2) regions, in addition to traditional levels of planning.
A positive feature of the new Hungarian regional development institutional structure is that
it triggered a decentralising tendency throughout the entire public administration system. It provides
a framework for co-operation between different levels and sectors and it also offers solutions to
certain disfunctions in the administration and spatial management.
This legislation was very advanced; however, its implementation was far from sufficient.
After the elections in 1998, the institutions, resources and responsibilities for regional
development were taken away and placed into the new 'super department', the Ministry of
Agriculture and Regional Development (MARD). However, not only this institution, but a range of
other ministries, regional, local authorities, organisations and NGOs were involved in issues
6
connected to rural development, constituting a highly complicated and sometimes overlapping
system. The reason for this entanglement, amongst others, is that the last decade was a period of
continuous change in the institutional system for rural policies.
In 1999, the Act on Regional Policy was modified, aiming at a more centralised and
possibly better implemented policy. Also in that year, preparation for pre-accession programmes
(e.g. SAPARD) started, new units within MARD were set up, a system of rural micro-regional
associations, covering almost the entire country was further developed and a range of rural and
regional development plans of different levels were written.
It is important to understand that, the balance and work of institutions is still very fragile in
Hungary. There are overlaps and uncovered areas. The change of government, or even of a single
minister, can result in the shift of directions and values and the actual change of many officials in
the ministries and other public institutions, even on lower levels. This makes the work of
bureaucracy fragile and often interrupted, causing dysfunction in the entire system.
Regional and rural development in a historical overview
Regional development policy – rural development prior to 1990
The problems of Hungarian rural development are largely rooted in past decades. To the
detriment of villages (small villages in particular) a centralising policy was in force for decades,
which drew resources away from the countryside.
As soon as rural regions and villages were able to achieve some development, then
infrastructure development driven by economic and administrative rationalisation led to the
abandonment of economic and social institutions in the majority of small villages. By reorganising
institutions on the district level they were practically shut down in minor settlements. Consequently
emigration and the ageing of the population began. The majority of villages lost their own selfgovernance, schools and as a result of forced co-operative mergers their economic potential too.
Consequently the assets of those living there devaluated.
On the other hand the reform of agriculture from the second half of the sixties (coupled with
the authorisation and subsequent booming of supplementary agricultural activities) led to a notable
improvement in the income situation of the rural population, which was particularly considerable in
major villages with a favourable transport location. Farming traditions and favourable natural
endowments were also an advantage.
This controversy (favourable agricultural but detrimental settlement policy in respect of the
countryside) however has somewhat softened in the second half of the eighties. Institution mergers
were no longer forced on the districts level. At the same time the profitability of agricultural
production deteriorated even though the former anti-agricultural and anti-household-farming
measures were practically abolished. The financial austerity measures, which were introduced to
tackle state indebtedness (with no political intention) led to a worsened situation of those in
agriculture and in the countryside in general. In fact, neo-liberal economic policy has been
detrimental to agricultural and rural population in all countries including the US and developing
countries too.
An interesting aspect about these belt-tightening measures in Hungary was that they had a
positive impact, namely that they lead to lower concentration. (This is presumably because
liberalisation has different implications in non-market driven or semi-market driven economies than
in developed market economies. Where the evolution of regional differences had been governed by
state re-distribution and not by market forces the reduction of state re-distribution results in the
equalisation of resource allocation rather than the polarisation of it.) Although the decisive role of
7
the National Planning Agency along with various party and council bureaucracies survived until the
late eighties in the allocation of regional development funds, these funds substantially decreased
from the beginning of the eighties. Consequently the earlier allocation mechanisms prioritising
towns and industrial centres halted, their resources run out. This was the primary reason why the
improvement of rural regions’ capacity to keep their population at place became an objective of
regional policy.
At the same time the austerity measures necessitated by Hungary’s foreign debt service
appreciated agriculture. In fact, without agricultural exports the declaration of insolvency seemed to
be inevitable. Until the mid-eighties the symptoms of the sector’s crisis did not manifest.
Emigration to towns therefore slowed down. Those migrating to towns preferred to move to nearby
(minor) towns. The so-called second economy (that is, outside the planned socialist economy)
became universally part of family’s subsistence strategy. As it was typically arranged through
informal channels it was advisable to retain family and acquaintance connections. In parallel urban
problems started to emerge. State financed large-scale housing construction started to downsize and
later completely ceased. It became more and more obvious that individual prosperity requires
participation in the second economy.
To acquire a flat was only possible by ones own means.
Regional development policy has also changed somewhat. Albeit the system of 5-year plans
remained unchanged, from 1985 a new method was elaborated for the development of underdeveloped regions: target areas were designated on the basis of statistical indicators and support was
allocated through tenders. The sum appropriated for this purpose was managed as a separate fund.
Although these changes were promising, they did not induce a basic re-arrangement. The so-called
settlement-development contribution (which can be regarded as a forerunner of local taxation) could
have inspired taxpayers to take control of local authorities, however its primary impact was limited
to raising funds. The system of councils remained practically intact, but the election system and the
political and administrative supervision of local councils became a bit looser by the end of the
decade. Local initiatives were launched and the parliament passed the Act on Associations, which
triggered the establishment of societies, clubs and other organisations mainly in towns. By the end
of the decade the intertwined administrations remained however unchanged in their position even if
their confidence and scope of competence decreased.
b) New framework conditions with EU accession
Regional- and rural development after 1990
The position of regional development changed after the election of the new government in
1990. The National Planning Agency and the Construction and Urban Development Ministry ceased
to exist passing the responsibility for regional development to the newly established Ministry of
Environmental Protection and Regional Development (MEPRD). Despite, in the first years the
position of regional development became marginal.
The resources of the new ministry were rather scarce. Supervision of local municipalities
belonged to the Ministry of Internal Affairs, whereas that of their economic management to the
Ministry of Finance. Besides, the attention of MEPRD was focused on the management of
environmental problems. It was around 1992 when the need for a more pronounced regional
development policy started to outline. By this time the intensification of regional differences
(particularly that of unemployment) was tractable in everyday life too, crisis regions emerged. The
8
need for a governmental management of this situation somewhat increased the importance of the
ministry.
The Municipality Act of 1990 had an epochal significance both in respects of political
affairs and the regional system, pursuant to which municipalities regained their independence, their
resources and their scope of responsibility. The former hierarchical system was replaced by a new
structure, where lower level municipalities are no longer subordinated to those on the upper level.
Local municipalities are not subordinated to county-level municipalities, those of the districts of
Budapest to the metropolitan municipality. The Regional Development Fund (RDF) was also
established. Meanwhile a number of civil organisations and NGO-s were founded, such as voluntary
associations of villages, development offices and environmental protection groups.
The role of counties was partially maintained in the public administration system, although
with substantially less authority. Partly due to legal regulations, but it is even more due to their
limited role in resource allocation. As a new institution, the Republic Delegate Offices were set up.
Their activities and scope of competence extended to 2-3 counties, as an intermediary
administrative unit they foreshadowed the organisation of regions larger than counties. Their leaders
were appointed by the government, ranking as a state secretary. Due to this and to their rivalry with
the counties the parliamentary opposition condemned this institution.
In regional administration nevertheless the most important change was to be the widening of
local municipalities’ authorisations and the strengthening of their role in public administration. The
centralisation policy and process of past decades reversed. Many of the villages previously bound
together in district notaries regained their administrative independence, whereas district notaries
comprising 5-10 villages were split into 2-3 parts. (A major is however elected even in the smallest
village.) In the beginning of the nineties local municipalities were allocated more substantial funds
than previously, which they could utilise at their own discretion, according to their own objectives.
It had an almost symbolic significance, that even the smallest village received HUF 2 million
annually from the central budget. It was a visible sign of de-centralisation that a number of
elementary schools were opened again in the villages.
Nonetheless the everyday life of rural people was more directly determined by the terms of
agricultural transformation and its consequences. The intensity of the crisis varied from region to
region. Consequently regional differences increased and became particularly problematic in the
north-eastern counties.
To handle this phenomenon the allocation mechanism of the subsidies financed by the
Regional Development Fund was improved. The identification of regions eligible for support was
carried out in a professionally and sound manner. Further, programs were elaborated for the
development of under-developed individual regions.
After 1994 however restoration tendencies started to work in regional administration. The
role of counties became important again and due to the austerity package in 1995 the resources of
local municipalities were substantially cut. When taking such measures the government often
referred to the requirements posed by EU accession.
The Regional Development Act of 1996 was also considered as a step in this direction. The
Act established a multi-tier, decentralised organisational system for regional development and
besides conventional levels of planning it also laid the foundation of larger regions. Although the
Act represented a progressive notion its details and implementation left much to be desired.
In fact, the Act introduced a number of organisational devices unparalleled in EU practice.
One of these was to make Regional Development Councils of the counties an important institution
in regional development. Although these council were established with reference to the partnership
principle, they were corporate bodies in fact. If they had wanted to transform these organisations
9
into programme accepting bodies following the EU pattern, then a different device should have
been chosen. In fact these councils were reluctantly accepted to be an elected, representative body
of the region albeit it was one of the preconditions of getting access to EU funds.
Another deviation is that in the EU backward regions are determined on a territorial level
much bigger than Hungarian counties. The classification of such types of regions is currently in
progress. Public bodies actually representing constituents’ interests are yet to be founded.
Nevertheless it is without a doubt, that the Regional Development Act of 1996 defined the
types of prioritised, underdeveloped regions similarly to the former (prior to 2000) practice of the
EU’s structural policy:

Socially and economically backward regions (similar to objective 1 regions of the EU)

Regions of industrial transformation (similar to objective 2 regions of the EU)

Regions of agricultural rural development (similar to objective 5/b regions of the EU)

Regions hit by high unemployment (similar to objective 3 regions of the EU)
In 1998, regional development organisations, resources and responsibilities devolved on the
reorganised Ministry of Agriculture and Regional Development (MARD). In 1999, the Regional
Development Act was amended so as to create a more centralised and manageable policy. In the
same year preparation for pre-accession schemes (such as SAPARD) began, new departments were
established within the MARD and a series of rural- and regional development plans have been
completed. At the same time, due partly to government policy, partly to civil initiatives the system
of micro-regional associations further developed throughout the country.
Rural- and regional development issues
Rural development was first touched upon in the Regional Development Act of 1996.
Taking it to the extremes one can say that it was completely ignored on the governmental level until
the mid-nineties. Moreover, since the second part of the eighties rural development related policies,
departments and jurisdiction - which became increasingly important in the agricultural ministries of
Western European countries - were driven out of the Ministry of Agriculture. (e.g. non agricultural
employment, development of rural infrastructure, preservation of traditions, landscape and natural
environment, village renewal, community development etc.) The official argumentation behind this
process stated that agricultural policy has nothing to do with such social matters. By contrast one
major task of agricultural policy is to get rid of them.
What was the reason for such a development, which ran counter to EU practice? One factor
was certainly the different nature of agricultural transformation. Further, the structure of agriculture
was basically different, together with local population. Middle class migration to the countryside
was less common. Therefore this social group could hardly play a role in orienting agricultural
policy towards rural policy.
Differences in the appropriation of budgetary resources between the ministries provide
another reason. In the EU countries the task is identified first, the support and the distributing
institution is decided subsequently. By contrast in Hungary until 2000 rural development tasks and
funds were not separated from those of agriculture. Therefore following the acceptance of the
ministry’s budget the agrarians aimed to utilise as much as possible for conventional agricultural
subsidies even though they used ‘rural’ as an argument in the budget-bargain. (they did it with much
success). If agricultural and rural development grants had been separated in the budget, then the
ministry had not intended to curb rural development subsidies. Rather, it would have demanded the
task and competence for itself.
10
From the mid-nineties, agrarians -though reluctantly- started to accept that rural
development can no longer be ignored in the course of EU accession. In December 1995 (when the
Strategic Study on Agriculture was submitted to the Madrid EU summit) sceptics and those in
opposition must have been convinced too. The EU commission declared unequivocally in this
document its priority to rural development policy and the transformation of the agricultural structure
in the accession process of candidate countries against conventional forms of agricultural
subsidisation, which is also on a downward trend in its own countries.
This standpoint appears even more pronounced in the Agenda of 2000. The figures included
in this document suggest, that associated countries might receive community funds for rural
development and agricultural modernisation even before their membership. Of course in accordance
with the structural support schemes of the EU and only if they conform to their procedural methods.
In Hungary the distinction between rural and regional development has been a problem
however. It might also explain why the scope of the agricultural ministry was extended in such a
way as to include regional development in addition to rural development. As a result there are
perhaps still some who do not understand the EU policy, which makes rural development a part of
agricultural policy and not a part of regional development.
Agri-Food Industry in the Hungarian Economy
The agricultural sector in all its aspects – agricultural production, forestry, the agri-food
industry and related services – has traditionally been of major importance to the Hungarian
economy. It ensures the domestic food supply, is an essential provider of employment, an important
contributor to Hungary's foreign exchange earnings, and is a dominant factor in rural development.
The agri-food sector is the only major sector in which Hungary is a net exporter.
Share of Food Industry in the National Economy (%)
996
Gross output
1
997
1
998
1
999
1
000
2
8
7
7
6
6
,6
.8
4
GDP
,0
3
,7
4
Investment
,6
,5
,5
5,2
3
4
4
1
2,9
3
,5
4
,1
1
0,5
,4
,3
,3
3
3
4
4
,5
,2
,2
,4
1
Exports
,4
,6
4
4
Number of employed
,4
4
,0
8
,0
6
,9
Source: KSH (2002)
Agriculture and the food industry have been affected by a change of enterprise classification
between sectors, which partly explains the abrupt cut in the share of agriculture between 1990 and
1991, together with a steep increase in the food industry’s share. Another factor was the splitting-up
11
of the co-operatives and state farms. Non-farm activities, which traditionally represented more than
40% of their activities, have generally been taken out of the reorganised farms and in general no
longer count as part of the agricultural economy. The 1990-1993 recession was worse for
agriculture than for Hungary’s economy overall: the cumulative fall amounted to - 31% for
agriculture against - 18% for the whole economy. The agricultural recession of 1990-93 was mainly
caused by:

the collapse of traditional markets in the former Soviet Union;

an unfavourable development of the terms of trade

the fundamental restructuring of land ownership;

the reorganisation of farms;

the immediate and delayed effects of abnormal droughts.
Recovery has been visible since 1994, and has been faster for food sector than for the
economy in general.
External trade of the Hungarian food industry
Although in a decreasing scale, the excess profit coming from foreign trade does strengthen
the commercial balance of national economy. Against the 2290 million USD export there was 981
million USD import in 2001 showing a positive balance of more than 1,3 billion USD. Regarding
export structure, the European Union plays an important part but in liberalization of the bilateral
trade there are yet unsolved questions at several products. There is an energetic opening towards the
Central and Eastern European Countries while the effects of the Russian crisis in 1998 impending
foreign trade are slowly coming to an end.
Share of food in the external trade of the national economy
(million USD at current prices)
Exports
Years
Imports
National Food
economy
12,867
1995
National
%
Food
economy
2,596
15,466
2
815
0,2
15,704
1996
2,385
19,100
18,148
1
2,468
816
23,005
21,234
1
2,424
896
25,013
25,706
1
1,994
960
28,092
28,008
8
1,951
12
-2,444
4
1,569
-2,134
4
1,572
-2,701
3
1,464
849
-2,996
3
1,146
-3,988
2
1,072
,0
32,079
6
0,9
1,781
0,7
,0
2000
-2,599
5
0,2
0,5
1999
Food
0,5
2,9
1998
National
%
economy
0,3
5,2
1997
Balance
880
0,7
30,498
2001
2,290
33,682
7
981
-3,184
2
0,5
1,309
0,9
Source: KSH, Food, beverages, tobacco. Value of external trade according to (SITC Rev.3. 0+1)
We succeeded in getting new markets and the Hungarian relations with the overseas
countries are being continuously enlarged. Leading edge in foreign trade is unbrokenly represented
by Germany, Russia, Austria and Italy but as a consequence of the constantly growing turnover also
Romania came up to them. Majority of the turnover is still provided by meat products but also
fodders, fruits, vegetables and cereals are given more and more emphasis in the foreign trade arena.
Worsening tendencies of the role played by the food sector in the national economy during the
1990s seems to stop, it touched the bottom-line and according to figures in 2001 a moderate growth
can be seen.
Exports of food by groups of countries (% in value)
1996
1
997
Developed countries
52,7
Central
and
Eastern
European countries
42,8
1
998
1
999
2
000
2
001
4
6,9
4
9,5
5
4
5
0,9
5
4,0
4
7,2
4
3,5
4
0,2
4
3,7
4
1,9
Developing countries
2,6
4
,0
5
,3
4
,8
4
,5
4
,1
Other
2,0
1
,9
1
,7
1
,1
0
,9
0
,0
Of which EU
46,3
4
0,9
4
3,5
4
8,8
4
4,3
4
6,4
OECD
59,3
5
4,8
5
7,9
6
4,2
6
0,9
6
0,8
EFTA
1,8
2
,0
2
,0
2
,4
2
,1
2
,5
CEFTA
12,6
1
3,8
2
0,6
2
2,1
2
2,2
2
1,2
CIS
20,0
2
0,7
1
4,8
8
,1
1
0,9
8
,6
Source: KSH, Food, beverages, tobacco. Value of external trade according to (SITC Rev.3. 0+1)
13
Foreign Trade of Foods
(Million USD)
Meat, meat preparations (SITC Rev.3. 01)
1995
1996
1997
1998
1999
2000
Export
691
798
792
678
595
590
Share in total food export (%)
26,6
33,5
32,1
28,0
29,8
30,2
Import
77
38
63
78
26
52
Share in total food import (%)
9,4
4,6
7,0
8,1
3,0
5,9
Dairy products, eggs (SITC Rev.3. 02)
1
995
1
996
6
Export
1
7
9
2
Share in total food export (%)
,3
8
,4
9
4
4
4
4
95
,8
1
,8
200
0
6
,6
4
4
,7
1
3
3
1
999
12
,2
3
3
Share in total food import (%)
7
3
9
1
998
9
,3
2
Import
1
997
4,9
3
45
6
4
,3
4
,3
5,1
Cereals (SITC Rev.3. 04)
1
995
1
996
5
Export
85
1
80
2
Share in total food export (%)
2,5
6
,4
3
2
5
5
297
1
6,4
2
,3
200
0
26
0,0
4
6
,1
4
1
8
1
999
85
6,7
5
4
Share in total food import (%)
4
7
0
1
998
12
,6
3
Import
1
997
15,
2
6
65
1
5
,4
7
,2
7,4
Vegetables, fruits (SITC Rev.3. 05)
1
995
1
996
5
Export
74
5
68
2
Share in total food export (%)
2,1
39
7,1
14
4
2
1
23,
3
1
153
36
1
5,0
454
2
3,5
44
1
5,6
200
0
68
1,3
1
1
5,7
5
2
40
1
999
16
1,6
1
1
Share in total food import (%)
5
2
28
1
998
32
3,8
1
Import
1
997
1
6,0
17,
3
Beverages (SITC Rev.3. 11)
1
995
1
996
2
Export
59
2
34
1
Share in total food export (%)
0,0
0
,7
1
9
1
7
2
5
2
3
5,1
2
30
9
2
,8
99
,5
7
,0
200
0
10
,1
7
3
,3
1
7
2
1
999
71
,3
7
3
Share in total food import (%)
1
998
80
,8
3
Import
1
997
3
,5
3,4
Source: KSH (2001d), Food, beverages, tobacco. Calculations based on SITC Rev.3. 0+1
The competitiveness of the Hungarian food industry
The privatisation starting earlier in comparison with other parts of the national economy
satisfied the expected results. Capital injection, westernise market view, positive effect of strategic
thinking striving for long-lasting efficiency appeared in most industry sectors. Obtaining property
by foreigners dominated in case of the big companies (obviously differently by each sector) and
promoted the more efficient, modern tools and forms of food processing and sale, which are more
adaptable to market demand. These new instruments are still used today. The called-up capital of
foreigner active capital investments exceeded 60 per cent in the average of food-industry in 1999.
This dominance also manifested itself in the obtained results. The process of privatisation however
does not come to the end. In certain industries, such as the milling industry, new investors, buyers
will modify the existent market conditions in the near future.
Share of foreign investors in Sales Turnover and Issued Capital Stock
of some food activities, 1998
Products
Share
in
Turnover (%)
Sales Share in
Stock (%)
Issued
Meat processing, preservation
31,8
36,9
Poultry processing, preservation
44,2
27,8
Meat and poultry preparations
57,1
48,3
Potato processing
73,9
84,2
Fruit and vegetables juice
35,7
53,7
Fruit and vegetables processing
42,0
55,1
Oil
98,2
98,8
Margarine product
54,4
34,6
Diary products
51,5
61,8
Preparations of cereals
13,7
14,9
Capital
15
Sugars
99,8
47,0
Sugar confectionery
81,3
94,5
Tea, coffee
97,7
99,4
Spices and stock
64,0
17,2
Wine
5,1
18,7
Spirits
35,2
44,7
Brewing
98,5
92,9
Soft drinks
83,3
97,2
92
88,1
50,8
67,8
Tobacco
Total food products
Source: Szabó, M. (1998)
Although the defencelessness of the food industrial firms appeared on the producers’ side
too (but it can be balanced by long-term contracts and private productions), the biggest pressure
came from retailing owned by multinational firms. The costs of entering chains, the extra expenses
relating to live up the claimed quality expectations, the continuous promotional activities, which are
essential for staying in competition led to the fall in the rate of profit. For the equalization of these
marketing methods also spread in the food industry, which serve the more efficient distribution of
goods, shorter stockpiling time and more attractive supply of goods. In this way they can decrease
the incurring expenses to be able to make much higher profit.
The most important objective of the programs, improving the agricultural sector on
the markets of the EU, is raising the competitiveness of the Hungarian food products. The
preparation for the attachment is on a good way also on the level of organisation, institutional
regulation, and economic policy. Due to the foreign capital, most sectors of the food industry is now
ready for the attachment, while some sections of agriculture are currently not competitive on the EU
markets, because of lack of capital, low technological standards and the shortcomings of adopting
EU-conform regulations. So the requirements are to match the supply structure to market demand,
spread the more popular cultures, and increase the rate of suitable products that are processed on a
higher level, well packed, and permanently meet market demands.
Having observed the changes of food terms of trade it indicates an improving tendency of
the years 1999 and 2000; although the continuous fall of the past few years give an explanation for
the turning of tendency. Since in 2000 the prices of both export and important increased
significantly compared to 1999, it still can only be spoken about the mark-up of export prices –but
they have not reached the former level yet.
16
Unit value indices of external food trade by groups of countries and main international
organizations
(Previous year=100,0)
19
96
11
Total
9,2
9,7
0,3
10
11
10
112,1
10
109,3
97,
118,8
99,
114,6
10
108,1
10
109,6
10
112,4
99,
110,1
10
108,9
95,
114,3
10
108,9
10
107,6
10
108,0
10
106,1
10
101,8
3,1
4,1
3,4
2000
1,2
10
11
11
7,9
4,1
6,8
6,3
19
99
10
11
2,6
13
Developing countries
19
98
Export
11
3,0
11
Developed countries
Central and Eastern
European countries
19
97
5
10
1,1
3
of which
11
EU
112,7
9,9
7,6
11
OECD
9,6
11
2,8
12
CEFTA
10
1,6
2,2
10
6,6
11
2,3
1,0
10
2,2
1,7
Import
12
Total
4,2
12
Developed countries
4,0
4,8
4,9
11
12
12
1
1,6
2,6
6,4
10
7,9
11
12
Developing countries
Central and Eastern
European countries
11
7,7
1,2
10
1,4
11
3,1
7
11
3,3
1,0
of which
12
EU
4
11
3,2
12
OECD
3
11
4,1
13
CEFTA
4,4
11
0,2
1,6
11
1,3
11
1,7
1,9
11
3,0
1,0
Terms of trade
95,
Total
9
96,
0
96,
4
2,1
17
96,
Developed countries
5
98,
1
10
Developing countries
4,3
Central and Eastern
European countries
94,
8
93,
3
95,
7
10
2,6
10
0,2
10
100,3
10
103,9
98,
105,2
10
100,4
99,
101,5
10
105,9
1,8
1,8
89,
2
3
of which
96,
EU
7
99,
5
97,
OECD
2
98,
8
90,
CEFTA
5
97,
6
0,6
95,
7
10
0,5
1
90,
4
0,7
Source: KSH (2001), Food, beverages, tobacco. Calculations based on SITC Rev.3. 0+1
The branch specific structural change of the food industry is absolutely necessary for the
improvement of competitiveness after the EU attachment. The examinations of foreign trade and
price competitiveness proved that the competitiveness of the Hungarian food industry is more
favourable than the countries waiting for joining. But the significant foreign active capital inflow
the taking over of the western management methods the use of new strategic methods do not
indicate immediate recovery from trouble. To help to understand the problems, I introduce the
historical background of some sectors, the agricultural connections, the background of materials the
role in export-import, the process of the organisational transformation and the shortcomings that
could be corrected in order to increase competitiveness.
Top 20 Hungarian Food Companies, 2001
R
Name of the company
Net sales (m Ft)
ank
in
2001
1
Philip
Morris Magyarország.
92305
.
2
Unilever
Magyarország
84129
6258
2
3 Rt
Pick
77694
.
6081
5
4 Pécsi Dohánygyár
BAT
77384
.
2896
8
5
Nestlé
Hungária
46438
.
3494
6
6
Bábolna
Rt.
18
6564
7
.
.
in
2000
43504
3937
8
7
Reemtsma
Debreceni Dohángyár
41679
8
Nutricia
Rt.
40878
n.a.
.
.
4607
6
9
Cereol
Növényolajipari Rt.
40752
.
4397
5
1
Coca-Cola
40286
0.
3684
5
1
Borsodi
Sörgyár
32707
1.
2009
9
1
Dreher
Sörgyárak
30535
2.
1963
5
1
Hungrana
Keményítő és Izocukor Gyártó
29991
3.
2287
0
1 Union
Brau
29773
4.
1949
7
1
Zwack
Unicum Rt.
26621
5.
2298
9
1 Foods
Sága
26198
6.
2408
1
1
Bábolna
Takarnányipari Premix Kft.
23906
7.
1870
2
1
Kometa
99 Kft.
22107
8.
1769
6
1
Fővárosi
Ásványvíz- és Üdítőipari Rt.
21333
9.
2112
0
2
Pápai
Hús
21303
0.
1934
5
Source: Ecostat (2001)
The postponement of the structural change of certain branches mostly gives an explanation
for the differences of their present competitiveness and preparedness. The way of privatisation, the
foreign capital inflow and the organisational structure (as the starting point of the change), typical in
the end of the 80’s were determining factors for the measure of the concentration degree.
In the branches possessing the greatest foreign share in called-up capital (e.g.: soft drinks,
tobacco, bier, sweets), where significant investments had been carried out the process of structural
transformation have ended at the acquisition and so a few large companies own the biggest part of
the market. In contradiction to this low concentration characterises the still changing branches (e.g.:
meat, poultry, vegetable, fruit, milk) that separates foreign interest differently by each company.
Situation of Food Branches in Hungary
Process of
transformation
Number
of
Level of
financial
Rate of
concentrationc
Share in
output
19
till 2002
companies
in 2000a
investmentsb
of food
industry
in 2000a
Meat
processing
unfinished
6
7
fluctuating
low
Poultry
processing
unfinished
4
0
fluctuating
medium
Meat
and
poultry
preparations
unfinished
2
7
fluctuating
Vegetables,
fruits
unfinished
7
8
fluctuating
Dairy prod.
unfinished
4
2
fluctuating
2
27
fluctuating
5
significant
Cereals,
milling
industry
unfinished
Sugar
unfinished
12,6%
8
,9%
high
3
,7%
low
8
,3%
medium
1
2,3%
low
1
7,7%
high
2
,7%
Sugar
confectionary
Spirits
Wine
finished
unfinished
unfinished
finished
Beer
2
3
significant
1
0
fluctuating
3
5
fluctuating
6
significant
high
2
,9%
high
1
,4%
low
2
,6%
high
4
,7%
Soft drinks
Tobacco
finished
finished
2
1
significant
6
significant
high
4
,8%
high
4
,2%
Vegetable oil
finished
1
significant
high
0
,5%
a
Source: Mezőgazdasági Statisztikai Évkönyv (2001), companies above 20 empl.
b
Capital investments
c
If max 3 companies gives the total turnover of the sectors than high, 4-6 than medium, above 6 than low
(according to ACNielsen, 2001–data of retail companies).
The trend of outstanding of the small- and medium-sized companies can be observed, if we
compare the share at the concentration degree of certain product categories and their
commercial brands. Small and medium firms (obviously large companies too): with small
capital but reliably producing good quality, sell often anonymously their products to chains
of the food industry, who will sell those under private label. It is worthy for both
participants, since it assures a continuous order in large amount for small firms and the
20
chains use the products for their brand policy, image-building and for the increase of the
customers’ loyalty.
Concentration and the share of private labels in some food categories in 2001
(Market share in value %)
Categories
C
R2
C
R3
4
Rice
4,9
5
0,3
3
Tinned vegetable
3,0
0,4
3
5,6
4
7,2
3
3,9
7,9
0,6
5
6,0
4
0,9
8
8,5
5
7,2
6
8,7
7,8
1,7
8
6
10,5
5
9,8
8
9,6
6
9,3
7
5,9
5
5,0
8
4,9
7
4,5
7,2
6
4,8
14,1
7,6
4,2
5
Coffee
3
6,2
4
7
Tea
15,8
7,3
8,5
3
Cheese
4
7,9
9,4
5
Cornflakes
16,2
7,8
7,8
5
Mineral water
4
8,3
9,4
8
Margarine
22,6
7,6
8,3
4
Cottage cheese
4
6,0
3
4
Fruit juice
25,8
8,5
7,1
2
Muesli
5
2,0
7,0
3
Butter
Share of
Private Labels
3,9
9,8
4
Noodles
C
R4
6,1
Source: data of ACNielsen (2001), CRx-Sum of share of the first X companies.
The privatization and restructuring process has not led to farm structures in Hungary
breaking up. Large-scale farms remain important while, besides traditional very small-scale
production, a new individual, independent, middle-scale, commercial agriculture is appearing. This
21
rather smooth evolution and the diversity of emerging structures can be considered as a positive
factor.
However, there are still structural problems:

the investment capacity of the different farm types is rather low: low self-financing capacity,
lack of efficient long-term credit system;

the control of land use is not always well established: corporate ownership is not allowed,
private ownership is limited, the land market is not operational.
The rapid restructuring and modernization of the food industry, largely under the influence
of foreign capital, represents a favorable factor for Hungarian agriculture. In medium-term, this
could also reduce the need for export subsidies, in line with the GATT commitments. The share of
household income spent on food is still high and food expenditure is therefore sensitive to income
levels. Thanks to increasing incomes, the domestic demand for food is gradually recovering, and its
structure is also changing.
Foreign Direct Invesments
The share of foreign property in the subscribed capital of the Hungarian food enterprises has
reached 60% in 1999 (KSH, 2001), which is by far above the national average.
Analyzing the FDI-flows among world-regions between 1995-1999, it can be seen the EUcountries of overriding importance: they give nearly 60 % of in- and outflow of direct investment.
From EU towards Candidate Countries flowed out yearly average 8,56 billion euro FDI, from which
21% to Hungary, about 1,8 billion euro FDI.
1995-1999 Average Yearly FDI Flows
In billion EUR and Share (%) in World Total
A
7
(1%)
sia
1
Japa
8
0 (2%)
(2%)
n
E
7
9
(2%)
FTA
(2%)
5
Candi
date Countries
1
1 1 (2%)
(1%)
0 (2%)
4
U
0
E
5 (9%)
SA
,3 (0%)
U-15
9
9
6
1 (18%)
(2%)
1
entral
Can
A
merica
S
outh
22
28 (25%)
5
C
0 (2%)
ada
1
(1%)
A
merica
(1%)
Source: Passerini (2001). World total (yearly):EUR 501 Bn (Source: UNCTAD)
The FDI inflows from EU to the CCs region are concentrated in Poland, Czech Republic and
Hungary. However, their share has registered a reduction in the period considered (82% in 1995 and
73% in 1999). The reduction of the share of investment in Hungary has exceeded the increase for
Czech Republic and Poland during the same period. Data show growing trend continued in 2000,
with Poland in particular increasing FDI inflows (EUR 10 Bn in 2000, nearly twice the average of
the corresponding values of the previous three years). This trend was driven, in particular, from the
advancement of the privatisation process, nearly completed in 1999.
FDI-inflow to Hungary in 2000 surpassed by 15,5% the previous year’s one, and by
17,6% the 1998’s degree. For many years it can be observable the tendency of an increase in the
number and share of exclusively foreign owned enterprises, while a decrease in the mixed owned
ones.
FDIs in Hungary between 1996-2000
(million euro)
2500
2000
2135
1922
1815
1815
1849
1603
1500
1759
1567
1426
1260
1000
555
388
376
319
500
202
0
1996
1997
FDI
1998
Shares
1999
2000
Credits
Source:
GKM (2001)
23
For many years Germany had been leading the rank of the direct investors, following
by Holland with continuously increasing share (Holland preceded Germany in 2000, its share
reached 29%).
Leaving US out of consideration the most important investors derive form EUcountries (Germany, Holland, Austria, Great-Britain, France), of which investment disposition are
on the increase year by year due to the relatively stable political and economical environment,
moreover to the cheap and well-qualified labour force. The rank of investors can be explained by
the economical power, the extensive international activities, the geographical nearness and the
traditional trade relations of each country, in case of Holland by the importance of food industry.
Foreign Investments in Hungary by countries of origin between 1992-1999 (%)
1992
1993
1994
1995
1996
1997
1998
1999
Germany
18,5
28,5
22,2
24,6
23,8
24,8
27,4
27,3
Holland
8,9
5,6
11,1
10,5
9,5
14,6
15,9
22,5
USA
12,4
21,0
14,3
16,0
17,1
15,2
12,0
8,8
Austria
25,1
15,8
19,1
15,9
14,5
10,9
12,1
12,1
Great-Britain
4,9
3,9
4,5
3,8
5,8
7,6
6,4
1,9
France
5,1
4,8
5,1
8,1
7,8
5,8
6,0
6,2
Italy
3,2
3,9
4,7
3,8
3,8
3,4
3,0
2,7
Switzerland
4,3
2,0
3,9
2,9
2,3
2,6
3,1
2,5
Belgium
2,9
3,2
2,1
3,1
2,6
2,9
2,6
2,2
Japan
2,6
2,6
1,9
1,3
1,6
1,5
1,8
2,0
Other
12,1
8,7
11,1
10,0
11,2
10,7
9,6
12,0
Total
100,0
100,0
100,0
100,0
100,0
100,0
100,0
100,0
Source: KSH (2001)
The privatization processes started in 1989 involved with different foreign capital investment
in the different branches. Besides the adopt of privatization techniques carried out in variable way,
among others the compensation of lack of capital, the development of external partnership, financial
reorganization, launch of the effective technologies became the uniform requirements.
The foreign capital took part in the privatization process of food industry took place
mostly until middle of 90’s with more and more bigger ratio. The reasons for this were the
significant export potential and the share on the external market of the food industry. In addition it
24
has to mention among motivation factors the expansion strategy of multinational companies
towards East-Central Europe, the low costs (raw material, wages etc.), the support of economical
environment, the new consumer behaviors and needs, the portfolio expansion or the chance of
buying of the brand names (e.g. Hungaricums).
According to the subscribed capital among food branches the ratio of foreign capital
exceeds 90% in oil-, confectionery-, brewery-, tea-, coffee- and soft drinks branches, but smallest in
milling industry, wine production, spice and stock cube branches. The economic policy tried to
brake the rapid foreign expansion by decentralization of privatization, by working out of different
techniques (e.g. Employee Part-owner Program, privatizational leasing, E-credit), hereby helping
on growth of the Hungarian property in the essential, basic branches (meat, milk, cereals).
Foreign capital in subscribed capital in Hungary
in 1998 and 1999 (billion HUF)
Industry, branch
Subscribe
d capital
1
998
Agriculture, forestry,
1
999
Of which: foreign
1
998
298,9
1
999
Share og foreign
capital in
subscribed capital
1998
1
999
7
,5
9
,7
30,1
3
11,2
2
2,4
33,4
3
2,2
1
1,5
10,5
34,4
3
2,6
373,4
3
79,8
2
30,7
229,9
61,8
6
0,5
Manufacture of textiles
70,3
7
2,2
3
6,0
37,0
51,2
5
1,2
Manufacture of wood
21,0
2
2,1
1
0,7
10,5
51,0
4
7,5
Manufacture of pulp, paper
85,3
9
9,0
4
0,5
42,7
47,5
4
3,1
2
53,1
1
41,0
146,8
56,7
5
8,0
fishing
Mining
Manufacture
of
food
products, beverages, tobacco
Manufacture
of
coke,
refined petroleum products
2
48,5
Manufacture of rubber and
plastic products
65,8
7
7,2
3
2,8
44,6
49,8
5
7,8
Manufacture of machinery
and equipment
80,8
8
3,8
3
9,5
45,1
48,9
5
3,8
25
Manufacture of transport
equipment
134,6
1
49,6
1
02,9
111,3
76,4
7
4,4
Wholesale,
repair
659,6
7
05,5
2
89,7
318,0
43,9
4
5,1
Finacial intermediation
452,1
5
02,0
2
52,3
273,7
55,8
5
4,5
Total national economy
6326,2
6
702,8
2
364,4
2624,5
37,4
3
9,2
retail
trade,
Source: KSH (2001)
Rural development
In 2000, Hungary’s GDP per capita was some 50% of the EU average. However, regional
data on GDP per capita show considerable disparities. GDP ranges from 201% of the national
average in Budapest down to 53% in the north-east county of Szabolcs-Szatmár-Bereg. Most of the
counties with above average per capita GDP are located in the western and central parts of the
country. Average unemployment for 1996 to 2000 was around 7-8%, falling below 6% in 2001, but
here too substantial regional disparities exist. Lowest in the western counties close to the Austrian
border and in Budapest unemployment is highest in the northern and eastern parts of Hungary. The
service sector accounts for three-quaters of GDP in Budapest; industry’s share peaks at 40% in the
central parts of the country, while agriculture’s contribution is highest in the county of Békés
(south-east) and in general in the south of the country. The role of agriculture in employment is
particularly important in the East and in the South of the country.
Rural and urban population
Budapest and the other main cities are generally better-off in terms of GDP and
employment, while agriculture, which was the main activity in the villages, has experienced a
deeper recession than the rest of the economy and has lost an appreciable amount of its workforce.
This evolution could be explained by:

city dwellers, especially older people, leaving the towns after receiving back a small plot of
land;

the emergence of poverty attracting people away from the towns to villages, where subsistence
can be easier;
Within the rural population, it seems that inhabitants of small villages moved to bigger
villages, where activities other than agriculture may have better resisted the recession. The relative
dynamism of the rural population does not translate into an economic dynamism. Few opportunities
for economic activity exist in rural areas. One important problem is linked to the restructuring of the
26
collective farms. Under the socialist regime, members of collective farms could have "household
plots". The system was mutually advantageous, as it created additional income for the members,
facilitated the marketing of household production, and supported the rural population. Moreover,
the co-operatives gave direct financial assistance to their members, after retirement or in the event
of illness. The co-operatives which could afford it performed the functions normally carried out by
local authorities at village level. Their industrial or service capacity provided an infrastructure for
the whole community, and they also ran or supported social and cultural institutions. This
"symbiotic" system has largely disappeared following the transformation process. Local authorities
should have taken over these various services but generally they lack the financial resources, the
infrastructure and the knowledge to do so effectively. Another handicap for rural areas is the pattern
of settlement, inherited from the socialist period. Under the concept of “rural centres”, all social
services (schools, health services etc) were concentrated in one village for every 3 to 5 small
villages. Owners of isolated houses were forced (no access to infrastructure and basic services) to
leave their farms and move into the villages. There are therefore nearly no farms (nor any buildings
or infrastructure) outside the villages. This poses a problem to the expansion of individual farms
and to the development of other activities. Moreover, villages have traditionally been prone to
ribbon development which, in addition to being visually unattractive, is space consuming and
impractical.
The Hungarian SAPARD plan was declared admissible on 24 March 2000 and was adopted
by a Commission decision after negotiations with Commission services and modifications of the
text. The annual allocation for SAPARD in Hungary for 2000 is EUR 38.7 million. On the
Hungarian side, EUR 12.5 million has been reserved for the national contribution in 2000. The
operational plan is based on two major priorities:

competitiveness of agriculture and the processing industry and focus on environmental
protection aspects (five measures: 62 % of the EU funds);

adaptation of rural areas (three measures: 36.5 %).
A major part of the funds available for the first priority area is dedicated to investments in
agricultural holdings (28.3 % of the EU funds). The other measures under this priority concern the
improvement of marketing and processing of agricultural and fisheries products (20.5 % of the EU
funds), the setting-up of producer groups (7.3 % of the EU funds), the agro-environment measure
(4.2 %) and the improvement of vocational training (1.7 %).
27
The second priority area includes measures for the development and diversification of
economic activities providing alternative income, the improvement of rural infrastructure, and the
renovation and development of villages. The allocation for technical assistance towards
implementation of the programme, including studies, monitoring, information and publicity
campaigns, is about 1 % of the EU funds.
Status of the SAPARD Programme in Hungary
The European Union elaborated The Special Accession Programme for Agriculture and
Rural Development (SAPARD), as one of the pre-accession instruments for the countries of Central
and Eastern Europe. The SAPARD funds are dedicated in particular to implementing the acquis
communautaire concerning the Common Agricultural Policy in the pre-accession period, as well as
to solving priority problems for the adaptation of the agricultural sector and rural areas in the
applicant countries. According to the Berlin Summit in the period of 2000-2006 520 million
euro/year will be channelled to the 10 applicant countries in the form of non-refundable support.
Hungary will be entitled to utilise 38,04 million euro (10 billion HUF) on the basis of co-financing
and will earmark 3,3 billion HUF within its national budget in order to ensure its national
contribution.
The general strategy of the SAPARD Plan takes into consideration the main problems of the
Hungarian agriculture and rural areas, and defines 3 major priorities: increasing the competitiveness
of the agriculture and the processing industry, focusing on the environmental protection aspects and
enhancing the adaptation capabilities of rural areas.
1. In order to achieve the goal of increasing market efficiency of the agriculture and the
processing industry three measures will be implemented relying on the sources of SAPARD
Program, according to the original plan:

Investments into agricultural holdings

Improvement of processing and marketing of agricultural and fishery products

Setting up producer groups (not included in the operative programme).
2. In order to strengthen the environmental protection aspects, measures on the
dissemination of agricultural production methods designed to protect the environment and maintain
the countryside are to be implemented groups (not included in the operative programme).
3. In order to enhance the development and the adaptation of rural areas the following
measures will be implemented through the utilisation of SAPARD sources:
28

Renovation and development of villages and protection of the rural heritage groups (not
included in the operative programme)

Diversification of activities aimed at generating alternative revenues groups (not included in
the operative programme)

Development and improvement of the rural infrastructure.
The Multi-Annual Financing Agreement and the Annual Financing Memorandum were
signed between the representatives of the Hungarian Republic and the European Commission on 1
March 2001. The multi-annual financing agreement provides that it shall enter into force on the date
when both contracting parties have notified each other of the completion of all necessary formalities
for its conclusion. A similar provision is provided for in the Annual Financing Memoranda for
2000. After the mutual notifications both agreements entered into force in June 2001. The
introduced financing technique of differentiated appropriations will enable the paying agencies to
obtain Community financing up to the second year after the resources have been committed. The
support amounts allocated for 2000 can be utilised till 2003. In order to cope with the deadline of
utilising the sums of 2000 the Commission has given its permission to the SAPARD Agency for
starting the tendering procedure from September 2002.
Employment and farm structure in rural agriculture
In spite of the fact that concerning the contribution to the national economy and the share in
the resources the role of the agricultural sector shrank in the last decade to its half and third,
respectively. Its significance is much beyond the primary economic benefit of the activity. It plays
an important role in retaining and development of the rural areas, in the development of the rural
society and in providing a living for the rural population of non-agricultural activities. In addition it
weakens the social problems and regional differences.
Owing to the economic and social transition and to the ownership restructuration the
participating economic organisations and enterprises of the agricultural sector are more varied,
flexible and of small staff members. The majority (95.8%) of them can be classified into the size
class of 20 employees and within these 93% have less than 10 employees (KSH, 2002). The precise
analysis of the employment is difficult due not only to the definition problems but also to the wide
scale of organisations still in restructuration. The employment generating capacity of small-scale
organisations is considerably limited and due to their cost sensitivity the defenceless of the
employees is increased.
29
Based on the Basic Agricultural Census of 2000 in addition to the 37 thousand enterprises
there are 958.3 thousand private (individual) holdings, which are considered farms by statistics.
Almost 2 million family members (20.3% of the population) are involved in this; the strength of
their connection to the farm, their purpose, motivation and working hours vary a lot (AKII, 2001).
A significant part (60.4%) of the private (individual) holdings are dealing with agricultural
production only because of self supply; therefore, its role in subsistence cannot be ignored,
however, it is not determinant at all. A little more than 30% of them announced to produce for
selling the surplus quantities exceeding the amount required for self-supply by generating this way
an additional income. The share of commercial holdings is only 8% (76.6 thousand holdings). The
information of the Basic Agricultural Census collected to serve production purposes warn us to
reconsider the subsidy schemes, the tax system and the law of the labour and social security.
As a result of the radical restructuration of the land ownership and land use (80% is in
private ownership) only a minor part (0.5%) of economic organisations cultivate almost 60% of the
crop land and 40.5% of the land belong to 958.3 thousand private (individual) holding. These ratios
demonstrate well that the land use of private (individual) holdings is significantly scattered. The
average area is 2.7 hectares and due to the 90.4-% proportion of holdings with less than 5 hectares
the area of the size class on average is less than 1 hectare. The number of private (individual)
holdings and their share in the area are gathering in the smaller size classes. The economic
organisations can be found in the upper classes of the size scale by illustrating the significant
differences between the two poles and two legal statuses concerning management and supporting
capacities.
In the last few years the speeding up of the economy generated a moderate growth and a
decrease in the unemployment rate, however, it is still disquietingly high and at the same time the
inactive proportion of the population in active age is also increasing. Between 1997-2001 as a result
of the increasing labour requirement of the industry, building and construction and services 250
thousand new employment were generated in the national economy, however, in the meantime the
labour output of agriculture continued. Between 1997-2000 the 12.5-% labour output of agriculture
(36 thousand persons) reduced the share of agricultural employment to 65%. The decreasing role of
agriculture is characteristic for all the regions, however, it can well be seen which are the regions
where agriculture– due to the favourable conditions, traditions and relative economic advantages is still significant (South Transdanubia, South and North parts of the Great Plain). The population of
the communities is 3-4 times more strongly bound to agriculture than of towns.
30
Crucial question of the EU accession is the wage and income rise of the population to the
level of the developed countries. Based on currency parity the average wages account for 11% and
on purchasing power parity for 30% of the EU averages. The growth of the income differences is
decreasing continuously, however the rate of the decrease is smaller compared to the first decade of
the nineties. The increasing income differences can also be seen between the regions, which is
reflected also by the development of the proportions of the various sources of income. In the
northern regions rates of income originating from labour are the lowest while that from social
incomes are the highest. In the regions of agricultural dominance (South and North part of the Great
Plain and the South Transdanubia) the shares of agricultural incomes are the highest. Besides the
decreasing unemployment the regional differences are increasing. The situation in the Northern and
North-Eastern counties are the most critical. Unemployment threatens most the olds and the
physical workers with low qualification and the return to work of this group is the most difficult.
Role of Food-industry in the Development of the Agriculture and Rural
Areas
In the 90s, parallel to the economical transformation, the relationship among the
agricultural producers and the processing industry has changed because of financial and
market problems, so there was an increasing tension. The price change, the deterioration of
the quality, the decrease of the demand, the shrinking of the state finance have all tainted the
relation-system nearly smooth up to that time. The family farms suddenly coming to life
after dismantling co-operative system couldn’t satisfy the large-scale and continuous
demands for raw-material yet, so the rebuilding of co-operatives was needed.
The condition of the competitiveness of the food-industry enterprises is the delivery
of raw-materials in the proper quantity, in the convenient place and time. That’s why
building up of the raw-material background with reliable, continuous new supplies became
so important. Recently the so-called vertical co-ordinations are getting more and more
significant in the producer-processor relation.
Up to now, in most of the branches long-term contractual relation in terms of Westerncountries hasn’t developed between agricultural producers and processors, which would
guarantee the process of product distribution without any obstacles. Of course they have
developed vertical coordinating mechanisms: contracts for several years or vertical
integrations. It’s common knowledge that the processors ensure demand for raw-materials
with the help of independent but majority ownership companies.
The effort exists to build-up a well-operating, long-term, producer-processor relation,
but still today demand and so the fluctuations of prices show favour toward short-term
contracts. Processors are careful: they rather produce themselves the basic materials,
integrate the production into their own, internal system, than let themselves influence the
unstable market effects, and exposed to the loss caused by purchase prices extorted by the
state.
31
The food industries play a significant role in the development of agricultural and rural areas.
The most important of these are as follows:

They can help in the establishment of economic areas defined regionally too,

can support the region in joining it to the economy of bigger regions and nations, and to the
European regionalization processes,

can have an advantageous from the point of view of regional employment and labour
market,

have an effect on the economical performance of the region, on the income growth both on
the individual and public level,

can increase the infrastructural development of the region,

with the increase of supplier’s capacity they can reach the development of the small- and
medium-size company sector connected with them,

can be instrumental in development of agricultural integration,

can increase in regional attractiveness, hereby in its role of population-keeping, and its
competitiveness,

can moderate chance difference among regions.
In the setback of agriculture 3 principal factors can be mentioned: the lack of capital,
confusion of agro-food product-chain and the structural difficulties. In the case of small and
medium-size enterprises, in particular small companies there are significant backlogs in
every respect. In their case greater support is needed. Particularly vital is the problem of
rural food-retail.
At the majority of food-industry companies the common view was that buying is primarily
built on the local producer and whatever problem happens, first it is they who buy from
well-tried producers. The EU-accession requires an increased consideration of
environmental viewpoints, so the processors make efforts not only in technology changes of
their own machines or quality-control of their own production, but in the regular keeping of
each member’s activity of vertical chain. Where the integrated production is running
smoothly, it is typical to have a close relation with the raw-material producers. It can extend
to the consultant or marketing activities, which quite often gives assistance to profiting from
the supports (e.g. Phare).
The food industry needs an agriculture which in large measures produces cheap but good
quality raw-materials, and the agriculture is able to develop only with a high-quality,
effective processing industry. From the close interaction of the agriculture, rural area
connected to latter one and the food industry result that their concerted managing and
development are the preconditions for increasing their competitiveness.
32
Results of the questionnaire
It made a survey among the food enterprises with the goal to compare the competitiveness, the
strategic view and the preparedness to the EU according to branches, company-size and regional
placing.
The questionnaire inquiry was preceded – which actually gives the base of the study – by a
deep interview made with marketing leaders of 8 food industrial firms (different sectors). The aim
of the interviews was to get more complete information that cannot be called down by
questionnaires and to help to edit the questionnaire.
Marketing leaders (where there was not a position like this, persons responsible for marketing
activities) were asked to fill in the questionnaires. At the selection of the involved firms, in the
investigation, it was a leading principle for me to get an overall picture from the situation of the
food industry also on the basis of company size (small, medium and large companies) arranged by
market data and the number of participants. The selected organizations operated in the branches of
meat-procession and -preservation, poultry-procession, vegetable- and fruit-procession and preservation, milk-, milling- and sugar industry, and beverage manufacture. The branches not
involved in the examination (soft drinks, tobacco, tea, coffee, sweets, fine oil) were left out because
they posses quiet big part of the foreign ownership (more than 90%, see also graph). Therefore the
comparison of the competitiveness of these sectors with other sectors would distort the real picture
into a positive direction. we left out the extreme deconcentration of the branches (they have a lot of
small and significantly differentiated participants).
We selected the companies by randomizing (every fifth firm in Trade Register) in order to
make them representative on the grounds of the number of certain sectors and within that the small,
medium and large companies. (I consider firms employing 50-249 people as medium-sized
companies). The number of the sent questionnaires was 350. I got back 138 out of the 350 (with the
help of phone inquiry) and 135 was valuable, which is 38 %. The final sending of the questionnaires
was preceded by the test-questionnaire sent to 20 firms, which tested the rightness of the content
and the realisability. The asked firms: I sent to 10-15% of all the companies in each sector, where
the large companies represented at least 70% of the sales of branches.
At the analysis of the answers, given for the questionnaire, it was a leading principle for me to
examine the differences relating company size separately at each question (average, standard
deviation, etc.). I used a statistical program, called SPSS 9.0 for the survey. In the case of factor-
33
analysis I used “Varimax” rotation1 and at cluster-analysis I segmented the answering firms with
the use of hierarchical cluster-method, Ward-procedure2, and the factors coming from the results of
the factor-analysis. I determined the number of clusters on the basis of the so-called ”Elbow”criteria3.
Results
Within food industry the alteration started in the beginning of the 90’s and the taking of
positive advantages attaching to it make good progress. Although there are still many areas where
arrears need to be made, it can be stated that such a sphere of organisations has been formed, which
seems to be competitive both in the Hungarian and the international market. Also in case of the
follower firms the way of looking at things begins to take shape. With this help, important factors,
which could result the progress of competitiveness, can be identified.
Among the instruction of questionnaire survey, I mention the increase of customer
orientation in the first place. On the basis of data, an integral part of strategic decision-making is
represented by buyers’ opinion; firms try to keep up with the growing social differentiation. The
other similarly important fact –which is typical for most of the companies-, is the effort to maintain
long-term relations with producers and deliverers, to reach a good relationship. Mutual dependence
became evident; the tendency of food industrial firms to the integration of producers becomes
stronger.
From the point of view of strategic mentality, I could differentiate three groups:
Cluster 1 (N=36): Self-confident leaders
Modern marketing attitude and strategic thinking characterizes these firms; their leading
role cannot be questioned. They have good relation with agricultural suppliers and they think in
strengthening of their regional market.
Cluster 2 (N=37): Opportunity seekers
1
The factors resulted in the factor analysis influence, with different weight, the trend of the same variable.
Between these so-called factor weights there could be negative numbers too, therefore, in order to eliminate this there is
a need for rotation of those (rotation in co-ordinate system). One of the mostly known procedure is the Varimax.
Hierarchical method of cluster analysis (they give an ordered structure of individuals and their groups’),
which minimise the square Euclidean distance from the cluster average.
2
Elbow point: the ”breaking point” of the line determined by the sum of quadrate errors and cluster numbers
(so the significant change that can be experienced in the gradient).
3
34
It is a special group; they are so customer-orientated as price- and cost-orientated. They try
to force down their prices, meanwhile they are sensitive for raw-material prices, have good relation
with agricultural suppliers too.
Cluster 3 (N=43): Followers
Making effort to satisfy of regional demand is not significant.
The picture shows a diverse picture of the situation of the questioned companies.
Concerning all types of firms the statements of „building up long term relations with producers” and
„the priority of quality”. On the other hand the „we offer our raw material supplier better conditions
of payment” statement got very small values.
On the basis of competitiveness we also formed three groups: Competitives, Survivals and
Stragglers.
Cluster 1 (N=37): Competitives
They hold themselves competitive in Hungary; they would like to form a long-term
relationship with the agricultural producers. By examining the answers, in connection with the
preparation for the attachment to the EU with the help of crosstabs, it can be stated that according to
the statements of the companies belonging to that group they feel prepared, they meet the
regulations of low and the environmental rules. For them is important to take the local needs into
consideration, they focuses on custom-designed products for strengthen of their market position.
Cluster 2 (N=42): Survivals
Their strength is the concentration on quality and total quality regulation. They have enough
storage capacity but the optimalization of their distribution system is fighting with some
shortcomings. They move along on a 2-way path: either they survive and get into the group of
competitive firms or they are fighting against winding up with the last ones. In case of these firms
the role of management is very important because the bases already exist to be able to be
competitive. In their trade they focuses mainly on domestic market and only some of them on
export.
35
Cluster 3 (N=35): Stragglers
They are the losers of economic change, they fight with the lack of capital. They are totally
exposed to the competition of the food industry.
According to the data it can be said it does neither depend on the branches nor on
the company size to which extent the company concentrates in its strategy on the agricultural
suppliers, environmental protection and regions. Naturally big companies which are prospering
and belonging to several branches have considerable effect on small regions. All these manifestate
themselves in the GDP and in the employment data of the given region but this is a long term
process.
3.
KEY ISSUES – IDENTIFYING PRIORITIES
a) National level
In this chapter first we compare Hungary and Hungarian regions to the member countries;
then, we deal with rural problems on sub-regional level.
Income distribution and spatial differences
Since the political change makes differences in income have been increased significantly in
the country. Due to the latter, Hungary’s index4 of Social Cohesion used by Eurostat, in comparison
with current member countries, does not show great income differences across households (Fig. 1).
Hungary (3.6) just follows the Scandinavian states. This result is based on the household panel of
the Hungarian Central Statistical Office (HCSO). The panel of TÁRKI (Social Research Institute of
Hungary), however, shows a little more uneven income distribution (4.4), but it still places Hungary
just after the Netherlands, a little before the levels of France and Germany. At the first glance,
Hungary’s position is satisfactory and it is in line with EU range.
4
Ratio of the top and lowest 20 per cent of household incomes.
36
Social Cohesion 1998
H
HCSO
EU-15
E
I
UK
D
NL
S
DK
8
7
6
5
4
3
2
1
0
Ratio of incomes by top quintile per lowest quintile
Figure 1
However, one should be aware that Social Cohesion index is measured by quintiles. If we
would calculate the same index for income deciles, even a higher income differences can be seen
from 7.1 to 8.1 times between the top and lowest ten per cents of households from 1992 to 1999
(Fig. 2). This phenomenon calls the attention for further and more detailed analysis comparing
current and candidate members.
HUNGARY: RATIO OF TOP AND LOWEST PERCENTAGES
9
8
7
6
5
4
3
2
1
0
1992
1993
1994
Quintiles
1995
1996
1997
1998
1999
Deciles
Figure 2
Unlike the applicable case of income distribution by households, there is no generally used
methodology to comparing countries by territorial income distribution. The obstacles of a fair
comparison are originated by the inhomogeneous territorial units by member (and candidate)
countries. NUTS 2 regions5, for instance, often include capitals (as Brussels, London, Berlin,
Vienna and Prague, etc.) or even big towns (like Manchester, Bremen, and Hamburg, etc.), but in
other countries even the capital belong to a NUTS 2 region, thus making the deviation lower.
Several countries compose a single NUTS 2 region alone (e.g. Denmark and each of the Baltics). It
follows that spatial differences might differ just from how have the boundaries of the regions been
37
established. Moreover, NUTS 2 regions are usually large, therefore internal differences are covered.
This situation, contrary to the previous trend, makes the differences less coming into view. It means
spatial difference across NUTS 2 regions should be considered carefully. However, income data by
regions are fairly available, even converted to the EU mean, which is a key indicator selecting the
regions for structural and rural fund accessibility in the European Union.
Standard deviations of GDP per person by NUTS2 in EU member countries
I
U
K
L
IR
D
SF
A
B
E
F
P
S
N
L
EL
30%
25%
20%
15%
10%
5%
0%
Figure 3
Nevertheless, these special differentiations across NUTS 2 regions are quite moderate in the
European Union (Fig. 3). It is not surprising that the lowest standard deviations are found in
Sweden and the Netherlands (14-17 per cent) but more notable that Greece and Portugal are
following them. The largest differentiations occur in Italy and the United Kingdom, though in a still
moderate extent (34-38 per cent). Hungary has lower spatial differentiation (below 30 per cent).
Hungary in the European regional structure
The sub-national regions in the European countries differ significantly from administrative,
economic and cultural angles.
In the Hungarian governance system, there is an intermediate (county) level between the
central and local (municipality) governments; county system has been existing since about 1000
year. This county level corresponds to NUTS 3. This level is composed from authorities transferred
from the local level on the one hand and from having established county branches of the central
administration from the other. Seven new regional units have been established, which corresponds
to NUTS 2 regions, and some authorities from the central government are to be allocated to them.
NUTS 2 regions in the candidate countries include generally larger area and more population
than in current member states. However, Hungary belongs to those countries where the average area
and population of a region are lower than the averages in EU-15. The density of population in
Hungary is below the EU-15 average, but higher than in the CEEC-10. Unemployment rate,
especially youth unemployment rate in most regions of Hungary is much lower, than in the EU-15.
Compared to candidate countries where employment statistics show much more unfavourable
performance than most member states, the distance is even larger. Within the country, the worst
employment situation is found in the Northern Hungary region, and it is still worse than EU-15 in
the Northern Great Plain. In both region unemployment rate exceeds the EU-15 mean by 18 per cent
and youth unemployment by 5 to 25 per cent. Apart from Eastern part of the country, in all the
remaining five NUTS 2 regions, the unemployment level is much lower than in the European
38
Union, down to 50 per cent. The worse situation is in the Trans-Danubian region, where the level
approaching 77-95 per cent.
The income level in Hungary (measured by GDP per capita in purchasing power parity) is
almost half of that of the EU. Among CEEC-10, it is the third highest level. An average level of per
capita income in the CEEC makes 38 per cent of the current EU-15 level. If this ratio will be
maintained, at the moment of the enlargement the overall EU level of per capita income will fall up
to 72 per cent of its current level. At the same time, the rate of growth in CEEC was considerably
higher than in the current member states during the last years. A catching up trend has been taken
place in the region and possibly incomes levelling trend occurs as well.
In CEEC-10, the GDP per capita in NUTS 2 regions is notably below the level of the EU-15.
In member countries, only Greece has one NUTS 2 region from 13, which is below half of the EU
mean, but the most CEEC regions are below these law classes. In Hungary, five from the seven
regions fall to 25-49 per cent class, but in Bulgaria all regions and in Romania 2 from 8 regions fall
into the class below 25 (Table 1).
It can be derived that candidate countries should increase their income level in all the
regions. Meeting this need the plan of the European Commission fairly intends to emphasise
regional and rural developments for the new potential members.
The highest income level in Hungary belongs to the Central region. Since the latest year of
comparative data (1998), the income level overpasses the 75 per cent of the EU level. The lowest
level in Hungary is shown by the Northern region and the Northern Great Plain where the
performance is only one third.
Number of development of regions in purchasing power standards
Country
Number
of
over
NUTS 2
150
regions
Number of regions where per capita
GDP in 1998 is
150125
124100
99- 75- 49- 25 &
76 50 26 less
per cent of EU-15 average
Member States of the European Union
EU-15
Austria
Belgium
Denmark
United Kingdom
Finland
France
Greece
The Netherlands
Ireland
Luxembourg
Germany
(Grand-Duché)
Italy
Portugal
Spain
Sweden
211
9
11
1
37
6
26
13
12
2
1
40
20
7
18
8
8
1
1
−
1
−
1
−
−
−
1
3
−
−
−
−
16
1
1
−
2
1
−
−
3
−
−
3
4
−
−
1
51
3
3
1
10
1
2
−
3
1
−
15
7
−
4
1
89
3
6
−
20
3
19
2
6
1
−
11
4
2
6
6
46
1
−
−
4
1
4
10
−
−
−
8
5
5
8
−
1
−
−
−
−
−
−
1
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
Central European Candidate Countries
39
CECC-10
Bulgaria
Czech Republic
Estonia
Poland
Latvia
Lithuania
Hungary
Romania
Slovakia
Slovenia
53
6
8
1
16
1
1
7
8
4
1
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
1
−
1
−
−
−
−
−
−
−
−
1
−
−
−
−
−
−
−
−
1
−
10
−
6
−
1
−
−
2
−
−
1
33
−
1
1
15
1
1
5
6
3
−
8
6
−
−
−
−
−
−
2
−
−
Table 1
During the transition period, the employment in agriculture has diminished a lot in Hungary.
In some regions, its share corresponds to several member countries (Fig. 4). The highest share (13
per cent) is shown in the Southern Great Plain.
Agriculture in total employment in Hungary, %
0
5
10
15
20
25
30
Central Hungary
C Trans-danubia
W Trans-danubia
S Trans-danubia
1990
2001
Northern Hungary
N Great Plain
S Great Plain
Figure 4
b) Regional level
Rurality in Hungary
In Hungary, the definition of rural has been intensively debated among professionals and in
the public domain. The meaning of rural in the public thinking significantly differs from the
scientific determination. Nevertheless, a consistent determination does not exist even in experts’
publications. However, through the appearance of rural development policy and especially rural
development subsidies this concept has gained practical importance, since for specification of
beneficiaries the identification of rural areas is essential. In the following we outline different
identification methods.
40
In the working paper called the “Strategic Program” (this is a part of Hungary’s Rural
Development Program) rural development was defined as a complex regional development strategy
aimed at preserving and enhancing the social, ecological and economic potential of rural regions
(i.e. integrated rural development).
The classification of rural regions in Hungary is laid down in the National Regional
Development Concept (NRDC). Based on this classification 83% of Hungary’s territory qualifies as
rural (representing 30% of the country’s inhabitants), in which territories the NRDC foresees the
adoption of principles and methods applied in the EU.
The OECD methodology distinguishes rural territories on a settlement (municipality) level,
examining whether population density is higher or lower than 150 people/km 2. The OECD
methodology is applied in the EU as well with the sole difference being the population density
criterion of 100 people/km2.
In Hungary the interpretation of “rural” is narrowed down in context of agricultural rural
development regions. Those backward rural sub-regions were included in this cluster, where both
agricultural employment and unemployment are significant. That is to say:
-
The urban/rural ratio is below national average,
The share of agricultural employment within the workforce is beyond the rural average,
The unemployment rate exceeds the national average by at least 33%,
Per capita personal income tax basis is less than 75% of the national average.
According to these measurements roughly a third of the country’s territory classifies as rural.
Rurality and the statistical system
The polarisation of rural and urban territories was accelerated by the change of the political
system and the accompanying economic transformation. These changes impinged upon the
traditional spatial structures of the country. The main features of this change are as follows:
-
The prominent development of the capital Budapest as opposed to the other parts of the country;
A growing gap between western, eastern and northern territories in favour of the western
territories;
- Deepening spatial structures in the development of the sub-regions;
- Intensifying economic arrangements within the settlement structure.
35-40% of national GDP is produced in Budapest. Besides the predominance of the central
region (capital and the surrounding county) quite a few other old structures have survived till now.
Pre-eminent of these is the economic and to a lesser extent cultural gap along the river Danube. This
economic and cultural difference could not have been disregarded when selecting the sub-regions
involved in the project.
In the nineties the Central Statistical Office established a new statistical- administrative level
in the nomenclature the so-called “planning statistical regions”, which split the country into 7 major
parts. (1. Region of West Transdanubia; 2. Region of Central Transdanubia; 3. Region of South
Transdanubia; 4. Central Hungarian Region; 5. North Hungarian Region; 6. North Great Plain
Region; 7. South Great Plain Region.)
This administrative level corresponds to the NUTS 2 level of the EU. Among the regions the
Central-Hungarian Region (containing Budapest) is a typical in that it is far more developed than
any other.
41
Why on sub-regions’ level?
In Hungary, it is only the county system, which has an established administrative and statistical
structure and a historic past. However, it corresponds to the NUTS 3 level of the NUTS nomenclature,
which plays a minor role in the rural development policy in several member country of the EU.
Moreover, most counties in Hungary – although would qualify as rural according to the 100
people/km2 population density threshold – are too heterogeneous to be classified as rural. All in all, the
population density measure alone seemed to be insufficient for the classification.
According to the effective Hungarian provisions all the higher level administrative units
(counties, regions) would also classify as rural, since they fulfil the criterion of not having more than
120 inhabitants (most of them have less than 100) per square-kilometre (except for the largest towns).
However these units are far too heterogeneous for analysis.
Therefore, after the review of the effective territorial classification system we concluded that
the most rationale would be to choose the so-called “statistical sub-regions for planning purposes” (or
planning sub-region) as level of analysis.
Below the county level, there are two sets of sub-regions.
One is designated by law and is called the 'statistical sub-regions', covering the whole area
of the country. This provides the framework not only for statistics, but also for every sort of
designation in the Hungarian regional development system. The “statistical sub-region” level
corresponds to the NUTS 4 level of the EU nomenclature, comprising normally 20-50 thousand
inhabitants. The country is made up of 150 sub-regions. This system of sub-regions is all-inclusive
and non-overlapping and does not transgress the county boundaries. (One county comprises
generally 5-10 sub-regions).
In most cases a sub-region consists of one major settlement (not necessarily urban) and the
surrounding villages, which are linked to the centre through their infrastructure, economy, healthcare,
education etc.
A sub-region is thus a community of geographically contiguous settlements tied together by
employment-, residential-, commuting-, medium level public service (education, trade, healthcare)
relationships. In this system each town is a local centre, however there are also local centres which are
not towns.
The current system of sub-regions has been applied by the Central Statistical Office since 1
August 1997.
The other type is the 'voluntary sub-regions', which consists of associations of local
authorities as a result of a bottom-up process. These are very diverse in their size or the population
covered, and many times do not match with the statistical regions, often causing confusion in the
system.6
Local authorities represent the settlement level in Hungary and have most of the resources
and responsibilities about everyday life concerns. There are 3120 of these with equal rights, most of
them (2902) in villages. Having an institutional system and resources on this very local level can
provide a significant factor for rural development. The abilities and the work of a village mayor can
have significant consequences for the development and future of the village.
6
For example, the difference between the Tapolca statistical sub-region and the Tapolca voluntary micro
region is that out of the 32 villages the former includes three village which the latter does not. This has only to do with
application for resources, because with the omission of the three relatively developed settlements the voluntary micro
region had a better qualification.
42
The village associations, described above, are also very important factors, since they provide
a framework for institutions and integrated development programmes on a sub-regional level.
In the course of our research we defined rural areas on the above level of “statistical subregions” – with some minor adjustments. This was supported by both theoretical and practical
considerations, as the county level (which corresponds to NUTS 3 level) are not homogeneous
regarding to rurality. There is probably a more important practical consideration, namely, those in
Hungary beneficiaries of rural development subsidies are selected on sub-regional (NUTS 4) or on
settlement (NUTS 5) level
We defined rural sub-regions upon the adjusted OECD typology. This method considers
practically the sparsely populated regions as rural. In our adjusted definition, we considered those
settlements as rural, which have a population density less than 120 people/km 2 instead of 150.
Without this modification almost the entire territory of Hungary could be considered as rural. That
justifies our adjusted method.
With our selection method, 92 sub-regions out of the total 150 are rural, which cover 55 per
cent of Hungary’s territory and one third of the population.
The first classification of sub-regions
In our methodology, we followed the classification of the CSO for the 150 NUTS 4 subregions. The different categories were those of determined by the referring publications of the
Central Statistical Office. By the CSO, in order to determine development clusters for the subregions 9 indicators7 were taken into account, which well characterise their economic and social
position and the general level of development.
The following groups were identified:
1. dynamically progressing regions;
2. progressing regions;
3. catching-up regions;
4. stagnant regions;
5. lagging-behind regions.
For analysing the specific role of the agriculture, we have introduced further breakdowns:
rural – non-rural;
7
These indicators are:
a, Registered capital of foreign companies per capita, 1998
b, Personal Income Tax basis per capita, 1998
c, Personal Income Tax basis per capita, 1998/1988
d, The number of operating business units per thousand inhabitants, 1998
e, The number of operating business units, 1998/1995
f,. Unemployment rate, 1998
g, Net Migration Difference per thousand inhabitants, 1990-1998
h, Number of telephone lines per thousand inhabitants, 1998
i, Number of cars per thousand inhabitants, 1998
43
agriculture – non-agriculture.
Rural-non-rural identification was taken from the OECD terminology, and 92 rural and 58
non-rural sub-regions were classified. Agriculture-non-agriculture classification was made by the
share of the sector in the employment in 1990. The distinction was made by the statistical mean of
rural sub-regions. Sub-regions above the mean were attributed to agricultural profile, and subregions below the average – to non-agricultural one. Among non-rural sub-regions, 56 have nonagricultural and 2 have agricultural profile. As far as rural sub-regions are concerned, there were as
many as 41 non-agricultural sub-regions, and 51 agricultural ones.
In the application, we have 16 groups at classifying the 150 sub-regions, as to four groups
not one sub-region has fallen. Practically we analyse only ten groups, because six groups have very
few sub-regions (1 to 4). They are as follows:

dynamically progressing, non-rural, non-agriculture (22);

progressing, non-rural, non-agriculture (17);

progressing, rural, non-agriculture (9);

catching-up, non-rural, non-agriculture (11);

catching up, rural, agriculture (9);

catching-up, rural, non-agriculture (20);

stagnant, rural, agriculture (13);

stagnant, rural, non-agriculture (10);

lagging-behind, rural, agriculture (17);

lagging-behind, rural, non-agriculture (11).
The work covers 141 (out of 150) sub-regions, where a necessary population is available in
the above 10 classes, for statistical analysis. These sub-regions represent more than 94 per cent of
the total area and population of the country In the analyses, standard deviations of the groups are
compared to one another and to that of the total population. The significance of differences that way
was approved. In the following, only some of the outcomes are presented.
The rural development programming is exercised at the local government level within a
NUTS 2 region, connecting to the National Development Plan of Hungary. The first step is to make
an analysis of the current situation, where two principal methods are used: either by a statistical
analysis of a set of statistical indicators, or a SWOT analysis or both. The strategic programming
makes out the general goals of the development plan, identifies the problems and priorities, and
establishes the program and chooses applicable measures. The operational programming includes
the agreement with potential actors, budget by sources. Here, we try to collect the main problems in
rural areas, to identify some priorities and to consider for choosing some applicable measures in
Hungary.
Analysing the situation from the first classification
The outlined statistical analyses help to figure out the main difficulties in rural areas and to
find the most critical types in NUTS 4 level. The outcome helps to orient NUTS 2 regions to
consider the most critical areas.
The population density of the sub-regions varies from 35-40 to over 500 persons per square
km with the most typical of 60-80. The population loss per sub-region is not significant: there are
44
only a few ones where the loss has been higher than 10-15 per cent during the last decade.
Unemployment and long term unemployment rate has an increasing trend from dynamically
progressing to lagging-behind sub-regions. However, the share of long term unemployment in total
unemployment (50-60 per cent) has no, or not significant trend. Another important criterion in rural
development is connected with employment in agriculture. It worth to mention that high rate of
agricultural employment occurs only in two types of sub-regions: catching-up (15.6 per cent) and
stagnant (19 per cent) ones, both types are rural and having agricultural profile. Although, laggingbehind sub-regions have similar share of agricultural employment as progressing sub-regions.
Similarly, the rate of fall in share of the employment in agriculture was nearly the same intensive in
the lagging-behind sub-regions as it occurred in the lagging-behind sub-regions. The most moderate
decline took place in the catching-up and stagnant sub-regions, where the decline was still
significant (50 to 60 per cent).
Income differentiation can be more precisely described at lower level sub-regions than in
case of NUTS 2 regions. It is notable, that concerning the lagging-behind sub-regions, there are a
third less taxpayers relative to the total population comparing to dynamically progressing subregions and the declared income per taxpayer is about the half of the latter. It results in a ten-fifteen
time difference in the income producing capacities. Due to the progressive taxing system of
Hungary, the differences in the contribution to the national budget, the difference is even bigger.
This phenomenon multiplies the requirements from regional policies; the income shortages in less
developing sub-regions provide less contribution to the budget. Nevertheless, an effective public
policy needs more income to transfer from the better progressing sub-regions, in order to make able
them to start a progress contributing to make new investments enabling the lagging-behind subregions to improve their capacities for income generation for the future.
Although, we concentrate on rural policy issues, some shortages in the infrastructure should
also be mentioned. There are relatively small differences in public water-, power- or gas supply, but
a great difference in public sewerage, transport conditions (accessibility to motor ways, to railway
network or to water transport, which is not developed in the whole country). Medical services,
measured both in the number of family doctors or children doctors and the service hours of the
medical centres vary modestly, but measured in hospital accessibility those vary greatly by subregions. Child nursery and kindergarten, as well as primary school capacities do not show much
differentiation, but in secondary schools and in higher education the pictures of the sub-regions are
differentiated significantly. Certainly, an efficient regional policy should not target to built hospitals
and universities in some rural areas, but helping their accessibility, should be of primary goal.
As far as the agricultural sector is concerned, there are some significant differences between
different types of sub-regions. The share of individual farms with non-farm activities is much higher
in the dynamically developing and the developing sub-regions than in those with the lower grades
of development. In lagging-behind regions, especially with low share, only 2-3 per cent of the
individual farms run non-farm activities. The density of such farms is also higher in higher
development sub-regions. Farming enterprises show much lower differentiation in this respect. The
distribution of ‘diversified’ farms clearly shows that lack of development goes together with lower
density and accordance of non-farm activities in farms. It indicates that diversification should be an
essential element in rural policy, not only in sub-regions with agricultural profile but in rural areas
per se.
At the same time, in sub-regions attributed to the lower grades of development, there is a
higher share of agricultural enterprises in the total number of enterprises either in individual sectors
or in companies. Furthermore, not only the density of total enterprises but that of the agricultural
enterprises (individual and company each) is lower. Therefore, in these stagnant and lagging-behind
sub-regions, a significant attention should be given to the development of entrepreneurship in
general and the training of local people supporting the latter.
45
It merits attentions that in sub-regions with lower development capability, the density of
private farms with full time operator is significantly higher (up to 12-16 farms per 10 km2). Their
share is also much higher (up to 16 per cent), while in dynamically developing and developing subregions it is below, sometimes far below 10 per cent. It shows that in sub-regions where people face
with serious restrictions to obtain income, and even unemployment is higher than the national level,
people have more efforts to run full time farms.
Likewise these trends, in sub-regions with agricultural profile, there is a higher land size of
individual farms in compare with other sub-regions. In rural areas, land size is usually higher than
non-rural sub-regions, with the exception for lagging-behind sub-regions. Opposite to the individual
farms, farming companies usually have lower land size in sub-regions with agricultural profile. In
these sub-regions, certainly a more intensive struggle is taken place for the possibility for individual
land use, due to the lower job opportunities. On the other side, it shows the evidence, that in case of
land shortage individual farms offer more job opportunities for the people than agricultural
companies do. Nevertheless, in non-rural sub-regions and at higher development capabilities,
farming enterprises can easier maintain higher areas to use as they really do it.
Analyses of rural areas by five sub-region classes
Nevertheless, it is easier to analyse less groups, therefore, we composed only 5 groups of
rural areas in the broader analysis. For this purpose, we aggregated some of the original
classification of the CSO. In this way, all the 92 rural regions were involved, but aggregated all the
non rural sub-regions. In this approach, the following rural sub-regions were classified:
1. Developed
2. Medium, non agricultural
3. Medium, agricultural
4. Undeveloped, non agricultural
5. Undeveloped, agricultural
To overview the demographic differences between these groups, the number of settlements
in each group differs from each other but the rural areas are almost the same (621.9 sq. m). The
difference amongst the number of settlements can cause that the population in the groups shows a
high standard variation. Together with a lower development level, the population density decreases,
too. The population rate shows a continuous decreasing by the level of development, what means
that the net migration has a negative sign.
The economic indicators also show expected differences. It can not cause a surprise that the
rural sub-regions has a relatively high employment in agricultural sector (agriculture and forestry):
more than 1/3 of the earners work in this field. The unemployment rate is high (5-12% in the rural
sub-regions) but the rate of the long-term unemployed working power shows a slight fall,
fortunately. The rate of the non-manual (white-collar) workers is extremely high (10-17%) but it is
lower in the under-developed areas. It can be due to the migration of this layer: the white-collar
workers leave their living place and settle in other areas and bigger cities. Income-support for the
unemployed people is higher in the under-developed areas.
The education is higher in the more developed areas but this fact has the disadvantage, that
the institutes (kindergartens, nurseries, schools) are crowded in these areas.
46
47
Stati stical sub-r egions of rur al development 2002
Dev eloped
Medi um, non agr i cul tur al
Medi um, agr icul t ur al
Undevel oped, agr i cul tur al
Undevel oped, non agr icul t ur al
Non r u r al
Legend
Because of the negative migration in the under-developed areas, the new built dwellings
have a lower rate, than the developed areas. The total number of the existing dwellings is almost the
same. The electricity and conduit water network in the buildings shows no difference among the
sub-regions, but the piped gas and sewerage: these public utilities have a higher penetration in the
developed areas.
Every sub-region has a lower number of both corporations and unincorporated enterprises,
than in the non-rural sub-regions. It is no surprising, because the enterprises are concentrated on the
towns, which are fewer in the rural areas. The enterprises are mainly industrial, trade and service
companies.
Retailing trade units are also represent them in a lower rate than the national penetration.
The lags are smaller in case of FMCG shops but bigger in the household application shops. The
inhabitants of the under-developed areas are a bit closed from the hypermarkets, and bigger stores,
which are in the cities, because, the private car penetration is very low there.
Hotels and catering services – which can be a really strong basis of rural development –
have a low rate in the rural sub-regions. The hotels and restaurants are mainly in the towns and
cities. This fact can be a starting point of rural tourism, private hotels ands catering.
The number of private farms decreased sharply in the last ten years. There is 2.5-2.8 persons
work in a private farm and this number increases parallel with the development status. The falling in
the number of private farms meant that the size of the lands per farms increased. Anyway this
increasing was high in rate but low in size. An average size of a private farm is 3 ha, with a really
high standard variance. The arable land and the vineyards, also have a high standard variance.
Cattle and pig stock is bigger in developed areas: cattle stock increased, while pig stock decreased
in the last decade.
The number of agricultural companies is almost equal in the sub-regions and the farm size is
bigger in case of private farms in lower development sub-regions. The cattle stock also concentrated
on the companies, and the dairy sector is also works mainly at the companies. It is because of the
high level of demanded investments. Pig stock penetration is lower in companies, than in private
farms, but in the non-rural sub-regions has bigger pig farms, which belong to companies.
4.
MEASURES CONTRIBUTING TO SOLVING PROBLEMS IN PRIORITY
AREAS
a) Scenarios – structured in policy areas breakdown
Income diversification
Corporate farms as principal subjects to diversification
The manner in which decisions are made and the power of the management varies
considerably between the different company forms. In limited liability companies the owner or
largest stakeholder in the company makes the decisions while managers implement them. However,
managers with appropriate skills and experience are appointed so that they are a reflection on the
decisions made, rather than their skills and experience influencing the decisions themselves. In the
case of joint stock company 2, the limited liability structure enabled the managers to gain power, by
amassing ownership of the companies. This enabled them to decide on the diversified activities to
be undertaken by the relevant companies and to cherry pick the most profitable ones prior to
48
amalgamation into a joint stock company. Maintaining these enterprises’ limited liability form gave
the advantage of not having to share dividends as would be the case in a joint stock company.
The joint stock companies have a more complex decision making structure due to the
presence of both a supervisory board and management board. In some cases such as for joint stock
company 2, the supervisory board members have effectively been determined by the management
who nominated the candidates, providing little choice. This enabled them to appoint people whom
they knew on the board who were unlikely to oppose their decisions. If the management have the
largest shareholdings as in the case of both joint stock companies, this gives them greater voting
power and is likely to influence the decisions of the other shareholders since, if the largest
shareholders believe that a decision is a good idea, they have the largest potential to gain or to lose
as a result. Thus, if they back a decision, it is an indicator that the decision is a good one. This will
tend to make other shareholders vote in their favour. In the case of the second joint stock company,
the managers’ ‘power’ over the former members is illustrated by their ability to make gains by
creating limited liability companies from the co-operative, which enabled them not only to amass
assets and power but also to gain from tax rebates in a process which they described as ‘making
money by doing nothing’. The members were obviously willing to sell up to them with the offers
that they made, but may well not have realised that the managers were gaining money from the
government in the process. The way in which managers can present a decision at an AGM for
votation will probably influence the vote too, since if something is presented in a persuasive
manner, it is likely that it will be passed. In joint stock companies, it seems that managers have the
greatest power and, therefore, it is logical that their qualifications and experience are reflected in
decisions about diversification. It also appears that qualifications and experience are a factor in
them being voted onto the board.
Managers in co-operatives appear to have a harder time in making decisions since members
always have the potential to withdraw their assets from the co-operative. Thus, if they were
discontent with a decision they could leave, potentially putting the company in jeopardy of
bankruptcy or failure. Difficulties in decision making arise due to lack of attendance at AGMs,
mainly because members either live at a distance from the co-operative or because many members
are pensioners. Either way, it is then necessary to call a second meeting at which decisions can be
made. The problems of making a decision were illustrated by joint stock company 1 which had
previously been a co-operative for whom transformation to a joint stock company had long been
delayed due to a failure to obtain agreement from the pensioners within the membership. Often the
managers seem to have been in their positions before reform, so that they have experience and
usually qualifications. It is them who often generate ideas so that those passed at AGMs are usually
generated by management and therefore, reflect their characteristics.
Diversification
With regard to diversification itself, it seems to have often been driven by the reform
process. This is because usually the reform has resulted in a fall in area operated, often as a
consequence of members withdrawing their land. The machinery and buildings had the capacity
required by the original farms size, so that the fall in area results in surpluses. The members who
withdrew their land often lack some of the machinery and storage facilities, knowing that the cooperative, joint stock or limited liability company have these assets, and may have previously
provided some of these services has prompted them to demand the services and the company to
provide them. In many cases it is unclear which factor had the greatest effect; the demand or the
supply. In these cases it appears that diversification has not occurred as part of a business strategy.
Some of the former co-operatives such as joint stock company 1 seem to have acquired
diversified enterprises from the pre-reform collective. These have failed largely as a result of a lack
49
of markets for the products. This is illustrative of the need to have a market in order to diversify
successfully. Joint stock company 2, appeared to have a very entrepreneurial management team who
were able to see opportunities both in markets into which they could diversify and in transforming
to different farm structures. Their diversification into seed production and a flour mill was
beneficial to both enterprises as it enabled vertical integration to be achieved whereby, the quality
of wheat, and, therefore, that of the flour could be controlled by the company and continually
improved. This was part of an important strategy to improve the quality of the flour in order to both
maintain and increase their market. Although both enterprises existed on the pre-reform cooperative they have been built upon and improved in order to make them successful under the new
company forms. The initial experiment in entering milling with the small mill to investigate markets
and the process demonstrates their business like approach in starting on a small scale before
becoming larger. The diversification into a mill, by buying it from the former collective also
showed that they were able to profit from the voucher system, enabling it to be purchased at a low
price, thereby, reducing sunk costs and the returns necessary to make a profit. A similar
entrepreneurial attitude was observed for limited liability company 3 which had had the opportunity
to diversify into retail outlets, and had been successful in this. Furthermore they had diversified into
a mill and grain trading as a strategy to reduce risk. This was the only company to describe their
reasons for diversification in this way. The company had been helped in its initial growth by
injections of capital from foreign sources which had also carried tax advantages. However, it was
not this alone which had made the company successful, rather its ability to market its products well
and the entrepreneurial attitude of the owner.
Limited liability company 1 also had an entrepreneurial owner who was very aware of
market demands for tourist services. The constant investment and generation of ideas has been
instrumental in maintaining and expanding a client base. This has been particularly important due to
competition within the locality. In this company, however, the use of government grants has been
vital in achieving this. Without such capital injection, the range of activities to attract tourists, and
probably the success of the enterprise would have been far less. Thus, government grants can be
important in aiding in making an enterprise successful. However, without the ideas and the
experience and knowledge of the owner in the sphere of tourism and catering, the enterprise may
have been more limited. The awareness of customer demands has enabled the enterprise to extend
its season. This has been achieved by offering more equestrian attractions such as riding of the
horses which appeals to a different clientele than those who come during peak seasons to watch
displays of horsemanship and folklore.
Thus, success appears to be based on entrepreneurial spirit and market awareness.
Researching the market for a good or service before starting it is vital in giving it a chance to
survive, understanding the requirements of customers is important not just in satisfying them but
also in overcoming competition should it arise. This is illustrated by both limited liability company
1 and co-operative 2 who compete on price, in the case of the hardware shop, seeking cheaper
suppliers. Limited liability company 1 has the advantage of its location close to the Danube to have
the opportunity to attract a different clientele, on cruises.
With regard to encouraging diversification on the three company forms, it appears that cooperatives are most hampered by their structure and lack of capital. Due to the fact that members
could potentially withdraw at any time, there is some uncertainty surrounding the structure which
can make financial institutions less willing to provide loans. Since members seem to have more
influence than shareholders in a joint-stock-company, this can lead to difficulties in making a
decision to diversify. On the other hand, limited liability companies seem to be potentially more
open to encouragement since decisions can be made by the owner without cumbersome
‘democratic’ procedures. Thus, decisions can be made faster and more easily. In the case of limited
liability company 1, new ideas were regularly generated and were implemented within a relatively
50
short period of time. In a joint-stock-company and co-operative such a rate of development would
be much harder to achieve since any idea which required investment would necessitate meetings
and agreement by others before being allowed to be implemented.
Most diversified enterprises in corporate farms are related to agriculture such as contracting,
storage etc. In several cases, attempts at diversification beyond such activity have failed due to a
lack of market. Usually these enterprises had started during the centrally planned economy when it
was not as necessary to find a market, appeal to customers and alter products as demand required.
Thus, managers from this period, although now aware that enterprises failed due to lack of markets,
did not have previous experience of this step when diversifying before the reform. Therefore, they
now are experiencing a new requirement in making a business successful and facing new
competition such as in the case of co-operative 2. In joint stock company 1, two enterprises had
failed which had functioned pre-reform, the machinery was retained but no real attempt had been
made to find a new market or alternative use for the machinery. Thus, in many cases marketing
advice, such as in finding markets, suggesting new products or services to provide and helping to
face competition and overcome it could be beneficial in promoting diversification. At present the
diversification strategy has generally been to continue in something already existing or provide
services as and when demanded by former members and other local persons, thus being more
reactive than pro-active. The impression was that although agricultural incomes were declining,
there was little strategy to counter it by diversifying out of the agricultural sector. The most creative
companies in this respect were the limited liability companies studied where in the case of
companies 1 and 2 an outsider to the previous co-operative or state form bought the farm and had
activity outside agriculture. The most successful and entrepreneurial diversifiers after this were in
joint stock company 2 which had previously had a limited liability structure, and management with
a very large shareholding. Thus, where decisions are made by major stakeholders, who stand to gain
the most from profit, there seems to be a greater drive to increase profit by diversifying. Thus, if
corporate farms are to be encouraged, targeting liability companies and joint-stock companies with
management teams having large shareholdings, and giving them marketing advice, and aid in
obtaining grants, the greatest effect may be seen.
POLICY SIMULATION
Methodology and study materials
(c) AI-based simulation and forecasting modules are prepared on the base of PIT for
agricultural decision support. Regional simulation modules on the base of RENOAAR is worked
out. New modules for education purpose also will be used.
AI-based simulation:
‫ٱ‬
Deducing on Artificial Intelligence base the yield trends was already made in the earlier
reporting periods. In this phase we made world market price forecasts. The correctness of
forecasts for 8 years is critical low with a commercial data mining software.
‫ٱ‬
For world market prices (WATSIM, FAPRI, OECD) we have only incidental literature data
for the correctness of these values.
‫ٱ‬
The index numbers (check list) of goal function controlled modelling was worked out,
which are useful for ballasting, verifying and to interpret model results
51
Restrictions:
‫ٱ‬
The possibility of working out the county level simulation dataset was examined on the
experiences of county level EAA`s (supported by USAID in 1997) and after the data
structure of IDARA. The compatibility of IDARA databases and the experimental county
level EAA`s is so high, that it`s no problem to extent the benchmarking logic of IDARA
datasets to regional level. Forming the county level EAA data sets is not the task of the
project. This could be carried out in the frame of the auxiliary planning and analysing
systems of Hungarian IACS, as it was suggested by the Hungarian workgroup (March
2002).
‫ٱ‬
For working out the Hungarian RAUMIS database, the University of Bonn and the
University of Gödöllő formed a consortium with a Hungarian market oriented company.
‫ٱ‬
After the check list it became clear, that along a new model application or along a new
project it would be practical to integrate into the model the checking aspects which could
cause a significant growth of efficiency instead of the current ex-post iterative and partially
automated way.
‫ٱ‬
Some concurrent models (FAPRI, OECD), and the base datasets (FAO) shows significant
differences in the case of Hungarian base data, which stalls the possibility of comparison.
Proposal: the formation of an international agricultural economical metadata and database
structure with online service (collecting experiences and Hungarian project to IHM Wif &
multigroup_03, selection and censure is in progress)
Comparative analysis of agricultural policies by fapri, oecd and idara
forecasts
ABSTRACT There is a vast number of different types of agricultural sector models and
possible variations available for policy advice. Given this variety and increasing complexity of the
model definitions quality management of data input as well as model output is becoming a crucial
factor in model development. Detailed checks of aggregated and disaggregated base data
contribute to a large extend to the overall quality of the model. Acknowledging the role of data
quality management, the idara project has introduced a set of socio-economic indicators that can
help to identify implausible behaviour of the simulation model i-sim. In order to validate the i-sim
results comparisons with other model results (FAPRI, OECD) were undertaken. Unfortunately, the
same checks could not be performed on base data and results from the other models, since the full
data set was not available. It is thus suggested that for (online) publications the full set of data and
balance sheets is supplied, including the code definitions. First comparisons between idara
reference run results and the other models show significant deviations. It is thus suggested that
sensitivity analysis may be performed in order to evaluate to what extend relative simulation results
(∆ Scenario 1 / ∆ Scenario 2) are influenced by different reference situations.
52
Introduction
The 5th Framework program idara Project (Integrated Development of Agriculture and Rural
Areas) 8 had the objective – among others – with the i-sim Model (on the basis of
MFSS999/CAPSIM, know how no.1.) to analyse the effects of joining the EU with different
scenarios in Hungary (and also in the Czech Republic and in Poland) 10. In this context, come the
results and the experiences of OECD and FAPRI forecasts for Hungary for 2006 in the case of an
unchanged agricultural policy. In an additional study, effects of other policy scenarios will be
presented too with comparison to the reference run/situation.
The Research and Development objectives of the workgroup in Gödöllő University:
 The creation of a consistent base dataset and an online database on the basis of current
fragmented sources. (know how)
 Adaptation Artificial Intelligence based estimations in the case of yield trends. (know how).
 The Quality assurance of modelling or working out a social-economical index value system
(check list) for supporting the decision makers (politicians) in choosing which result vector
(own or concurrent) is better, more authenticated, or more likely (know how).
 To take part in the adaptation and testing of i-sim (know how).
Reference run and comparison
For having a reference run, a detailed and consistency checked database (know how no.2.)
was set, for the base year 1998 (3 years average), and as exogenous variables consists AI based
forecasts for yields (know how no.3.), for world market prices (FAPRI), for inflation and for fallow
land size till 2006 for Hungary. These components together with the quantified agricultural policy
(without joining) lead to the comparative statistics of the agricultural sector model “i-sim”. The
elasticity based i-sim Model using the basis leads to absolute values and changing rates/indexes
from 1998 till 2006.
Similar calculations were published in Agricultural Outlooks for 2006 by FAPRI and OECD
(see 1 Illustration). Comparing earlier model-results may give important notices and advice for
improving the reference-run.
st
Evaluation
For closing a reference-run, or to be able to evaluate other alternative results / sources,
detailed hypothesis (expectations, check lists for consistency) were set earlier the developments up,
so background processing is still necessary. These expectations may be defined as a complex
consistency criteria system (know how no.4.) or a social-economy index system (compare with
Balanced Score Card).
8
Cf. idara Internet Seit http://www.agp.uni-bonn.de/agpo/rsrch/idara/idara_e.htm.
9
WITZKE, H.P. / VERHOOG, D. / ZINTL, A. (2001): Agricultural Sector Modelling: A New Medium-term
Forecasting and Simulation System (MFSS99). Eurostat, Luxemburg
10
BAUER, Kai (2002): Documentation of the Idara Agricultural Sector Simulation Model for CEE Countries (isim). idara working paper 1/3., see: http://www.agp.uni-bonn.de/agpo/rsrch/idara/idara_e.htm. Date 27.7.2002.
53
Table 2. Comparing different results of OECD, FAPRI and idara for chosen products
and activities
Item
Year
Activity
Dimension
FAPRI
2001.IV.
FAPRI
2002.VII.
FAPRI12
11
FAO
Online13
IDARA15
OECD14
Reference
run
Soft Wheat
Activity Level
2006
1000ha
1172,9
1170,4
1140,0
-
1230,1
Soft Wheat
Yield
2006
kg/ha
4340,0
4337,9
3900,0
-
5150,0
Soft Wheat
Production
2006
1000t
5090,5
5077,1
4446,0
-
6335,2
Maize
Activity Level
2006
1000ha
1386,0
1250,9
1160,0
-
1528,6
Maize
Yield
2006
kg/ha
6000,0
6249,2
5850,0
-
4530,0
Maize
Production
2006
1000t
8316,0
7817,2
6786,0
-
6924,6
Dairy Cows
Activity Level
2006
1000 head
360,0
362,6
-
-
366,7
Dairy Cows
Yield
2006
Kg/head
6026,0
6022,7
-
-
6700,0
Dairy Cows
Milk Production
2006
1000t
2169,4
2183,7
-
-
2456,6
Cattle
Meat Prd.
2006
1000t
54,8
56,6
-
-
121,9
Pigs
Meat Prd.
2006
1000t
-
538,7
-
-
383,9
Soft Wheat
Activity Level
1998
1000ha
1100,0
1100,0
1100,0
1183,5
1100,0
1,054.67
Soft Wheat
Yield
1998
kg/ha
4550,0
4550,0
4550,0
4139,0
4550,0
4,040.00
Soft Wheat
Production
1998
1000t
5005,0
5005,0
5005,0
4898,7
5005,0
4,260.85
Maize
Activity Level
1998
1000ha
1100,0
1100,0
1100,0
1022,5
1100,0
1,065.67
Maize
Yield
1998
kg/ha
5450,0
5450,0
5450,0
6007,8
5450,0
6,252.34
Maize
Production
1998
1000t
5995,0
5995,0
5995,0
6142,7
5995,0
6,662.91
Dairy Cows
Activity Level
1998
1000 head
379,0
379,0
-
379,0
382,0
407.27
Dairy Cows
Yield
1998
kg/head
5558,2
5558,2
-
5558,2
5510,0
4,927.96
Dairy Cows
Milk Production
1998
1000t
2106,6
2106,6
-
2106,6
2104,8
2,007.00
Cattle
Meat Prd.
1998
1000t
65,0
65,0
-
-
70,9
62.39
Pigs
Meat Prd.
1998
1000t
-
408,0
-
-
298,3
582.37
Soft Wheat
Activity Level
98-06
∆%
6.6%
6.4%
3.6%
11.8%
Soft Wheat
Yield
98-06
∆%
-4.6%
-4.7%
-14.3%
13.2%
Soft Wheat
Production
98-06
∆%
1.7%
1.4%
-11.2%
26.6%
Maize
Activity Level
98-06
∆%
26.0%
13.7%
5.5%
39.0%
Maize
Yield
98-06
∆%
10.1%
14.7%
7.3%
-16.9%
Maize
Production
98-06
∆%
38.7%
30.4%
13.2%
15.5%
Dairy Cows
Activity Level
98-06
∆%
-5.0%
-4.3%
-
-4.0%
Dairy Cows
Yield
98-06
∆%
8.4%
8.4%
-
21.6%
Dairy Cows
Milk Production
98-06
∆%
3.0%
3.7%
-
16.7%
Cattle
Meat Prd.
98-06
∆%
-15.7%
-12.9%
-
71.9%
Pigs
Meat Prd.
-
32.0%
-
28.7%
Source: See foot-notes
11
FAPRI (2001): FAPRI Model, Temporary Results, Download: www.fapri.org Date: 09.11.2001 and 11.1.2002
12
FAPRI (2002): World Agricultural Outlook 2002, Staff Report 1-02, Ames. Download: www.fapri.org Date: 27.7.2002
13
FAOSTAT (2002): Agricultural Database, Rom. Download www.fao.org. Date 27.7.2002
14
OECD (2002): Agricultural Outlook 1998-2006, Paris
15
Average for 1998 (1997-1999)
54
It is expectable, that the values of the model results – on the basis of the predefined exogenous
assumptions (check lists for undesired model behaviour) and on the basis of the endogenous
equation system (i-sim), should be in the predefined green interval. The complex check lists criteria
exclude the great mass of the autocracy of modelers. Important components of the check list:

Land use balances, product balances, livestock-cycles, desaggregation of the sector to
activities, (to regions,) in the case of reference and simulation year too.

The product balances should stay firm in 2006, as the necessary quantity of seed, fodderand food components (e.g.: fodder ration) should be available.

Product balances should be free from deviations.
In addition of these extended ABTA rules, the check list system consists a series of
plausibility tests:

The changing rates of commercial volume of products (cf.: residual quantity) should be real
(cf.: share of World market in a case of certain product quality)

The share of consumption in market should be increasing in the contrast of the share of use
on the farm (cf.: QA).

The share of consumption meet and animal products should grow in the contrast of
vegetable products, unless the rate of product prices increasing is higher than the rate of
income increase.

The average live weight of animals should be constant unless the development of genetics or
the intensity of feeding don`t change significant.

The livestock growth difference of the simulation year and the start year have to reflect the
biological coefficients (cf.: imports). The fodder supply (e.g.: grass land) should change
with the size of livestock.

Investments in new technology and genetics have to be micro-economical incentive.
Up till now, in OECD and FAPRI publications no balanced reports could be found.
Therefore, it`s impossible to evaluate the followings:

How big is the production-territory to divide? (compare it with:
http://miau.gau.hu/miau/47/oecd0102.xls)

Which activities are in the balances included (as predefined and residual values)? (see land
use statistics: http://miau.gau.hu/nappalos/2001osz/ginfpotfea.xls,
http://miau.gau.hu/miau/40/statisztikak/ )

The values for the base year from different sources are not identical, even they are quite
diverse. The partial explanation for this is, that the product definition are not standardised
(Broiler ≠ Poultry).
55
Figure 5, Comparison of wheat production changing 1998/2006 (percent), level, yield,
production value in a case of an unchanged agricultural policy (FAPRI, OECD, idara)
30.0%
25.0%
20.0%
15.0%
%
10.0%
Umfang
5.0%
Ertrag
Produktion
0.0%
-5.0%
FAPRI (2002)
OECD
IDARA
-10.0%
-15.0%
-20.0%
Source: OECD (2002), FAPRI (2002), idara (2002), own figure with size, yield, production

The forecasts for the yields are quite diverse for 2006 (see Figure 1.). E.g. After FAPRI
wheat yield decreases by 14.3% from 1998 to 2006, while OECD Agricultural Outlook
consists 13.2% growth. After idara the same value is 4.2% growth (AI based calculation).
FAPRI trend can not be derived, as without EU accession the yields will be increasing
because the economical background becomes more and more stable.

The results of OECD shows relative great changes from 1998 to 2006. On the basis of the
elasticity specified i-sim Model the changes are moderated. (At OECD not known how big
the fallow land was set for 2006, while idara set this value for 50% of the reference year.
Unfortunately the value of fallow land is not defined as a residual value. This means that the
model doesn`t calculates at how many hectares it`s not worth to produce in microeconomical point of view.)
The high complexity of the problem leads for the use of balanced reports (cf.: land use,
product balance, animal cycle, disaggregation of the sector to activities, to regions, etc. cf.: IDARA
online http://miau.gau.hu/toma). Therefore some calculations are unsure to evaluate, and in them
the published values are not detailed enough for making balances. A relative high punctuality of
forecasting requires the simulation-year to be as detailed and exact as the basis-year and all the
constraints/checklist (from market, micro-economical and economical trends till policy depended
mass and price structure) should be satisfied.
The presented simplified comparison gives only advice, that Quality Management with the
help of balances for the first side and with the help of plausible value intervals on the other side can
be used for improving the model results. About the full publication of the results, leads for the
choice to get in touch with the model developer and with other experts to improve more the quality
of the data and the forecasts.
It is suggested too, to develop an international standardised data set and index system. The
possibility for ex-post checking the results of the forecasts should be a purpose.
56
The reference-run serves for the basis for comparing, for evaluating the effects of several
policy scenarios against the reference year. As the results of the tested models are quite different
from the reference run, the sensitivity analyses may have great role in the future. Through the
sensitivity analyses it can be described whether the impact of political variables firms or weakens
the non political variables.
Suggestions
 To interpret the Hungarian situation at all times in EU based, it`s crucial to develop
continuously the IDARA database with integrating into it the newly formed years.
 For real model competition an international social-economical database and the
consolidation of the base categories would be necessary.
An Artificial Intelligence based methodology
In the EU5 frame project IDARA (QLRT-1526), the Gödöllő workgroup had the task to
supply a consistent dataset for the i-sim sector model, and on the basis of it to determine trends
(eg.:yield) for the next 8 years.
According to the classical SPEL methodology the trends of the exogenous variables is given
by expert decisions after the optional trends of the variables. This task is unique, requires theme
specialised experts and iterated solution, which is slow and expensive.
The Gödöllő workgroup - against the foregoing - has worked out an Artificial Intelligence
based methodology, which changes the forecasting question to a similarity analysis question where
not only one time series should be used describing only a relatively short and relatively
heterogeneous economical situation of a country, then the use of all the connectable time series of
all the other countries (see Appendix). The results - generated by this method – give, whether the
given variable increases or decreases after 8 years and on the other hand relative frequency values
are connected to this statement, which show the right answers ratio in the learning (function
generating) and in the test period for the complex process. In this way the quick and safe forecasting
process can be insured.
For other antecedent it may mentioned the task from Autumn 2002, where forecasts had to be made for 2001 (in the case of missing
statistics, basing on earlier incomplete datasets), which helped to define the cost and price components behind the consumer price of any products in
Germany. For this, SPEL datasets were used, which contain the time series of cost components (natural values and price values), and the time series
of the prices and the yields. The base of the forecast was the trend function of the spreadsheet handlers. The self-check was made by the difference of
the sum of forecasted components and the forecasted resultant (total cost), if the difference was under a certain low level. After the experiences it can
stated, that the price and quantity trends of the components are likely to change only in a reduced, squared level, and in this way the two way
forecasting (components + resultant) gives an almost identical result for 1-2-3 years (with decreasing trend). In that case if the distance of the forecast
was changed (for more than 10 years, 100 years) or some of the trends were changed with disproportionately dynamical, the difference of the sum of
the components and the resultant became significant.
Trend based expert opinions
If the experiences are projected of the two tasks to each other, it can be recognised the next
methodology in it:
1. Choose a certain problem, where numerous components and their resultant have time series
(e.g.:yield, price, production value).
2. Define the set of (trend) functions for analysing.
57
3. Define the set of parameter values (length of time series, the weight of the elements in the
time series, the time to forecast, the ratio of learning and test…).
4. Create a macro, which modifies each of the trend functions and parameters randomised (see
MCM) or partly goal oriented (see GA, NN).
5. Calculate the difference of the forecasted values for the sum of the components and for the
aggregated value.
6. Do it until the combinatorical space is covered or the difference decreases under an optional
low value.
7. Log the parameters and results for all runs.
Interpretation of the log:
Supposing, that in the case of such a complex goal function (like difference minimization) the chance of over learning (solutions with little
error, but inconsistent inner structure) is minimal, the settings for the less error, can be seen as the ideal forecast for the components and for the
resultants as well. In this way, the correctness of trend function settings for the yields become authentic as the estimated cost components values
reflect the production value.
It is not worth to see only the ideal solution (minimal difference) of course, then the close sub-optimal cases, as depending on the frame
conditions we may count on solutions with alternative structure with more or less chance.
The extension of the solution
In that case, when the components and the aggregate has no empirical connection (e.g.: the
elements of the weather, or the shares on the stock market as more chaotic), and the optional
constellations are excluded, but connection can be supposed between the components, forming the
goal function is a serious intellectual challenge but not impossible. (The ideal goal function
theoretically does not exist!) The goal function in this case is meant by the definable rules for the
constellation of future optional situations, which can be proportionally formulated/incidental exact,
or trends prescribing. With this, we get back to the classical problem of machine learning, or to the
question, which exiting condition ensures, that the better solutions in learning phase prove good in
the test phase with high probability.
If the forecasting methods is handled as a separate module for each components, all the
resource of the methodology of AI research can be integrated.
Summary
The introduced methodology assures in case of any problem to win complex (with ballasted correctness) solutions on a spreadsheet
platform, with slight macro support. In this way on the field of agricultural sector modelling, the necessity of expert decisions in the case of
exogenous variables can be omitted or can be reduced for choosing between the best solutions. This process is quick and authentic.
58
Results of the simulation
i-sim Scenario Results
Sectoral Income
Composition of Production Value
6,000.00
Mio EUR
5,000.00
4,000.00
3,000.00
2,000.00
1,000.00
-
BAS
RRHU
1SHU
2SHU
Gross Value Added at Market Prices
Fodder
Plant Inputs
General Inputs
1.
2.
3.
Production Value and Gross Value Added increased after accession
Model shows not much differences in plant and general inputs, but higher
fodder input in CEEC scenario
Highest GVAM in CEEC scenario mainly caused by quota level (milk,sugb)
1
i-sim Scenario Results
Production Structure I
Share of Animal and Plant Production
100%
90%
80%
70%
60%
Value of Plant
Production
50%
Value of Animal
Production
40%
30%
20%
10%
0%
BAS
RRHU
1SHU
2SHU
Share of animal production on Agricultural Production Value will
increase in 1SHU most, because of restrictive milk quotas and lower
premia for cattle
8
59
i-sim Scenario Results
Production Structure II
Land use
100%
Only very limited changes in Land
allocation between Scenarios:
Slight increase in Cereals and
Oilseeds due to Direct Payments
Fodder Crops
80%
Vegetables/Fruits/
Prennials
60%
Other Arable Crops
40%
Oilseeds
20%
Cereals
0%
BAS
RRHU
1SHU
2SHU
Share of Animal Products
Drastic Changes in Animal Production:
- CAP favours Beef and Milk Production
- Higher price level and quotas set
incentives for Dairy Production
- High market pressure on Pork and
Poultry Production (lower EU price
level) and removal of national
subsidies
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Other Animal
Products
Milk
Poultry
Pork
Beef
BAS
RRHU
1SHU
2SHU
9
i-sim Scenario Results
Quota Effects: MILK
Activity Level DCOW
500.00
450.00
Rising yields in combination with Quota
restriction leads to lower Activity Level
than without quotas
400.00
1000 hds
350.00
300.00
250.00
200.00
150.00
100.00
50.00
BAS
RRHU
1SHU
2SHU
Gross Production DCOW
3,000.00
2,500.00
2,000.00
1000 t
Gross Production is determined by
Quota, binding restriction!
1,500.00
1,000.00
500.00
BAS
60
RRHU
1SHU
2SHU
10
i-sim Scenario Results
Quota Effects: MILK
Effects of different Policy Scenarios
70.0%
60.0%
50.0%
Revenues
40.0%
30.0%
Activity Level
20.0%
Production Value
10.0%
0.0%
-10.0%
DEV EU/REF
DEV CEEC/REF
Gross Production /
Domestic Supply
-20.0%
-30.0%
Revenues (EURO/hd) rise in both scenarios relative to the reference
situation (no accession), but due to quota restriction, activity levels and
gross production go down in 1SHU (EU proposal)
11
i-sim Scenario Results
Direct Payments: Soft Wheat
Effects of different Policy Scenarios
160.0%
140.0%
Revenues
120.0%
Activity Level
100.0%
80.0%
Production Value
60.0%
40.0%
Gross Production /
Domestic Supply
20.0%
0.0%
DEV EU/REF
DEV CEEC/REF
•Revenues and Production value rise due to Premia and higher EU price level
•Revenues are higher than in reference situation for all scenarios
•Activity levels remain almost unchanged due to higher revenue increases in
other crop activites (Oilseeds)
12
61
i-sim Scenario Results
EU Market Pressure: Pork
Activity Level PORK
7,000.00
1000 hds
6,000.00
5,000.00
4,000.00
3,000.00
2,000.00
1,000.00
BAS
RRHU
1SHU
2SHU
Effects of different Policy Scenarios
0.0%
Pork production is reduced due to
internal market pressure (low EU-15
Prices)
No differences between the
scenarios
-5.0%
DEV EU/REF
DEV CEEC/REF
Revenues
-10.0%
-15.0%
Activity Level
-20.0%
-25.0%
Production Value
-30.0%
-35.0%
Gross Production /
Domestic Supply
-40.0%
-45.0%
13
-50.0%
i-sim Scenario Results
EU Market Pressure: Poultry
Activity Level POUL
200.00
180.00
160.00
1000 hds
140.00
120.00
100.00
80.00
60.00
40.00
20.00
BAS
RRHU
1SHU
2SHU
Effects of different Policy Scenarios
0.0%
Market pressure on poultry production
not as drastic as on pork
DEV EU/REF
-1.0%
-2.0%
Activity level increases around 5%
compared with reference
-3.0%
DEV CEEC/REF
Revenues
Activity Level
Production Value
-4.0%
-5.0%
-6.0%
62
Gross Production /
Domestic Supply
14
Conclusions from a Hungarian
Perspective
•
•
•
•
•
•
•
Sectoral income is rising after accession
Production structure changes mostly for the animal activities
away from pork and poultry to milk and beef
Production Activities that gain from accession: Beef, milk
(revenues only), cereals, oil seeds, potatoes, sugar beet
(revenues only)
Production Activities that get under pressure after accession:
Pork, (poultry)
Quotas significantly hinder competitiveness and necessary
structural changes
For the products with the sharpest market pressure there are no
direct payments (Pork, poultry)
Compromise proposal achieves similar level of production with
lower costs to EU Budget => advantage for negotiations
15
63
Policy Implications
Short Term (Negotiations)
•
•
•
Quotas and ceilings are more important than Direct Payments
Maximise flexibility in measures so that competitiveness and
structural change can be improved/supported
Think cross-sectoral, since serious welfare effects on other
sectors if allocation is misdirected.
Mid Term (Post-Accession)
•
•
Form political alliance to abandon quotas
Use national envelopes for policies that support structural
changes
Use rural development measures to increase alternative
employment opportunities
Pressure on agriculture will rise with quality competition from
EU-15
Further investigate regional effects
•
•
•
16
b) Strengths and weaknesses
Main results of the Hungarian case-studies
In formulating our proposals we use more sources. We were helped by the study on current
practices and institutions of Hungarian rural development. We employed studies on practices of EU
member states, among which those about diversification were especially useful.
We prepared case-studies in three selected sub-regions (Tapolca, Kunszentmiklós and
Nyírbátor) on the practice of rural development. These case studies have based upon processing of
relevant statistics, collection of data at appropriate level and in the field interviews.
When selecting sub-regions, our main principle were that sub-regions should be:
-
located in different regions of Hungary and
differently developed.
The different categories were those of determined by the referring publications of the
Central Statistical Office as mentioned before. By the CSO, in order to determine development
clusters for the sub-regions 9 indicators16 were taken into account, which well characterise their
economic and social position and the general level of development.
16
These indicators are:
a, Registered capital of foreign companies per capita, 1998
b, Personal Income Tax basis per capita, 1998
c, Personal Income Tax basis per capita, 1998/1988
d, The number of operating business units per thousand inhabitants, 1998
e, The number of operating business units, 1998/1995
f,. Unemployment rate, 1998
64
Using the CSO’s indicators the selected three sub-regions fall into the following categories:
-
Tapolca – developing
Kunszentmiklós – catching-up
Nyírbátor – lagging-behind
Using the adjusted OECD methodology we selected 92 rural sub-regions which were
grouped upon the above CSO-method into 3 categories. Namely, we contracted the two most
developed and the two less developed groups. According to this classification, sub-region Tapolca
belongs to the developed, sub-region Kunszentmiklós to the medium and sub-region Nyírbátor to
the backward category respectively. That means, there is no shift in category
Besides sub-region based case-studies several statistical evaluations have been made upon
the 92 rural sub-regions. In the course of this evaluation we tried to typify sub-regions using clusteranalysis methods. These attempts proved to be unsuccessful, mainly due to the high density of
urban-rural areas, which makes it difficult to use reactive indices.
Based upon the 3 above groups of sub-regions, we tried to refine our classification taking
also into account the level of agricultural employment. Albeit this led to a duplication in the number
of categories (viz. 6 instead of 3), there was merely one region found among developed rural subregions with an above-the-average agricultural employment rate.
Sub-region Tapolca
As far as tourism is concerned, the location of the region is one of the most favourable in the
country. The coast of lake Balaton is more suitable for the classic forms of tourism
(camping, hotel etc.), whilst the uplands of Balaton provide an excellent scenery for agroand village-tourism. Due to the establishment of the Balaton Uplands National Park and the notable
architectural heritage of many villages it is becoming a more and more popular target.
A chief concern of the sub-region is that the season of classic tourism is very short and very
vulnerable to the weather. It is one of the main tasks to extend the season. Village tourism and wine
tourism are good possibilities for that, since they are not very dependent on the weather.
Tourism in the sub-regions is closely related to wine growing. The regions Badacsony and
Balatonmellék (both are in the Tapolca sub-region) produce well-recognised and evaluated wines.
Vine growing and wine production play an important role in providing employment as well.
Through the integration of vine growers in the traditional wine producing regions (including
processing, bottling and marketing) the market-demand for standard quality wine varieties could be
met in tradable volumes. This would accrue extra added value. For the time being, however, the
marketing of the region’s viticulture is somewhat behind the other historic wine producing regions
(Tokaj, Villány), which are actively engaged in marketing.
The relative obscurity of certain villages has their backlashes as well. For example there are
significant holes in the region’s road network. This prevents the integration of certain villages
(those situated in the Dörögdi basin). According to the assessment of the Tapolca Regional
Association 26 km new asphalt road should be built and further 36 km should be reconstructed to
facilitate usage by heavy transport vehicles.
g, Net Migration Difference per thousand inhabitants, 1990-1998
h, Number of telephone lines per thousand inhabitants, 1998
i, Number of cars per thousand inhabitants, 1998
65
The popularity of 8-10 villages among foreigners and urban residents who acquire houses
there has a lot to do with the serious demographic problem (depopulation) in the small (200-700
inhabitants) and very small (50-200 inhabitants) villages. This “crowding out” of local residents is
particularly serious as many municipalities are lacking reorganisation plans, which is necessary for
the construction of new dwellings.
As the quality and quantity (20% of the total) of arable land is below national average, the
traditional sectors of agriculture are downsizing. Due to the lack of incentives for the conversion to
less intensive agricultural practices, extensive land use is also scaling back (sheep husbandry).
Fragmented land ownership relations also limit the possibility of profitable farming.
Due to restrictions imposed on the extraction industries (silicate) the associated industrial
sectors are also declining. The industrial activities of past decades left a number of distortions in
the landscape yet to be re-cultivated.
Sub-region Kunszentmiklós
Natural endowments gave rise to an exceptionally rich flora and fauna, which is a
characteristic feature of this geographical unit. Environmental protection is of high importance in
the region, the National Park of the Kiskunság playing a prominent role in protection of its flora
and. The natural values of the sub-region are a part of one of the most extensive contiguous
environmentally protected areas of Europe, which provides an excellent opportunity for ecoexcursions and hiking.
In front of such a background it is a major problem that the facilities for tourism are not
developed enough to generate income. There are also deficiencies in public utilities, sewage
network in particular. There is a shortage of accommodation places both in terms of quality and
number.
The first steps have already been taken to launch organic farming in the region. Training was
started under the auspices of the farmer association (gazdakör) and a significant number of farmers
took up ecological farming in horticulture. Extensive, pasture based sheep-farming (which is an
important land use pattern here) can be considered as ecological farming!
The other side of the coin is that poor fertility is typical of a great share of the region’s land.
Increasing number of plots are afflicted by alkalisation and sand-drift. Consequently yields are low,
and the profitability of the agricultural sector is extremely poor. Moreover, the entire territory of the
region is exposed to flood and inland waters accompanied by unfavourable water balance in
general.
Land and estate market of the region are under-developed, due to which the increase of asset
value is limited.
The proportion of Environmentally Sensitive Areas is high, which raises problems
concerning agricultural production and the protection of natural environment. The lack of
compensation payments for extensive agricultural production has been against the application of
sustainable practices.
A great deal of the sub-region’s opportunities concern the market of bio- and organic
products, herbs. The interest in products manufactured exclusively in Hungary (so called
Hungarikums) and in regional specialities is rising.
If it will extend sufficiently, then it might provide an alternative opportunity for the
utilisation of natural endowments.
66
Also the introduction of the National Agri-Environment Programme might provide for a
preferential treatment of Environmentally Sensitive Areas.
Husbandry of autochthonous animal varieties, fresh-water fish breeding and afforestation are
objectives supported by the agricultural governance.
As regards industry, the region’s closeness to Budapest, cheep labour and the existing stock
of estates enable the region to take part in the Industrial Park Programme launched by the
Hungarian government. To improve the grade of processing of agricultural products various
resources have been made available recently for production capacity extension and further resources
will be available in the near future.
The Budapest-Kelebia (north-south) Euro Transit railway trunk-line crosses the region at the
junctions of Kunszentmiklós and Szabadszállás, which makes the sub-region easily accessible.
Until now, however low quality, traditional mass-product manufacturing has been
characterising the region in general, there was a lack of innovative investments. This was both a
reason and a result for a workforce-drain of Budapest, Dunaújváros and Kecskemét, which makes
the population of the sub-region more and more inactive. Ageing speeded up simultaneously.
Sub-region Nyírbátor
The region located in the Southwest part of the Nyírség (eastern extreme of Hungary) boasts
rich and diversified flora and fauna containing a world-famous fallow-deer reservoir. The amended
legislation concerning hunting rights declared the land and the forest owners the beneficiaries of
hunting rights (opposed to the former practice benefiting the state). The utilisation of the concerned
territories for hunting purposes is therefore cluttered and unpredictable. With regard to hunting, the
lack of professionals as well as the deficiencies in infrastructure and services can be listed
additionally.
Associated untapped resources lie in the region’s wood processing and small game breeding
fields.
As for the other land use options, degraded sandy soils mainly characterise the region.
These soils have very poor fertility due to their low nutrient content, structure and acid reaction.
Among plant species it is only suitable for certain fruits (apple) and vegetables.
Besides its natural values, clerical tourism attracts a considerable mass of people year by
year, the centre of which is the religious pilgrimage place, Máriapócs renown across Europe.
As cultural centre, Nyírbátor plays a prominent role in the life of the region as well as the
broader vicinity, some of its programmes (music festival) and the settlement itself enjoying national
popularity and international repute.
Utilisation of the existing tourism endowments is however not yet sufficient due to various
reasons. Besides its far-off location it is also a problem that a single, well-managed profile does not
exist, external communication performance is poor. There is a shortage of infrastructure serving
tourists, as there is also a shortage of tourist information on the region
The geographical location of the region, its closeness to the Romanian and Ukrainian
borders might on the other hand provide a favourable advantage. Intensified merchandise activities
and fledging transit traffic are expected to result from the strengthening of relations across the
border.
This might make use of the region’s substantial workforce surplus, which has a qualification
level roughly on the national average.
67
On the other hand presently the sub-region suffers more from its location than benefits from
it. It is quite remote from the substantial national road and railway transit lines. As regards to water
and air infrastructure, they do not exist at all.
Until now - as the complex economic difficulties (lack of employment opportunities and
income) afflicted the eastern part of the country in particular – the overall economic situation was
deteriorating. Internal demand has been stagnating at a rather low level with regard to services as
well as industrial goods and prime necessities.
Partly due to system change the number of unemployed grew substantially. The proportion
of persistently jobless is high within the total number of unemployed. The problem of
unemployment is intertwined with that of the roma minority, which represents some 20% of the
population.
Competitive companies/entrepreneurs of larger scale do not exist in the region thus the role
of integration normally performed by such companies is also not fulfilled. Biggest shortage is in
trade, services and finance companies.
EU accession -hopefully taking place in the near future- might boost economic activities in
the region (industrial park). Some conditions are supportive to the exploitation of these possibilities
(workforce surplus, closeness of borders), whilst other fields seem to require further development
(infrastructure).
If the economic rebound fails to materialise the progressing segmentation of the local
society and the problems of the roma minority could lead to a situation, which is hard to handle. A
favourable solution requires government level assistance as well.
It is a warning sign, that within the active population there is a massive emigration out of the
region among the young and the higher qualified. This process is hard to reverse.
Problems of the regions – lessons learned from the interviews
The disadvantageous rural sub-regions of Hungary have some common characteristic like
being peripheral or sub-peripheral regions, having poor soil quality, underdeveloped infrastructural
background and on account of that two further phenomena: lack of investment and high
unemployment, out of which unqualified and Romany unemployment is dominant.
Other unfavourable demographic trends are characteristics of the scrutinised sub-regions,
among others the ageing of population (around 40% economically active in comparison with the
national average of 51%), high migration of the young better qualified generation due to
disadvantageous remuneration and the poor quality of living conditions. The better educated part of
the young generation normally do not return after graduation, the qualified industrial and
administrative workers tend to migrate to towns too. Locally there is hardly any possibility to get a
qualification based job.
The depopulation of small villages is particularly severe problem in the Western and
Northern part of the country.
Owning to unfertile soil and small average plot sizes agriculture provides only low income
and infrastructural problems impede setting up of non-agricultural activities.
There are some environmental-related problems as well. Underdeveloped sewage system,
lack of canalisation, the scarcity of purification capacity and wastewater collection endanger the
quality of the groundwater, which is particularly important considering the fact that significant parts
of all explored sub-regions have been defined as highly sensitive area within the National AgroEnvironmental Program, since all of the three evaluated sub-regions has territories situated in
68
National Park reserves. Furthermore, this fact means that restraints set up by the National Park
limiting the potential of intensive farming. Independently of this situation the potential of extensive
farming and tourism is not utilised by the sub-regions. On the other hand we also felt that there are
unrealistic expectations concerning rural tourism. In our view rural tourism has only good
perspective in those areas of the country, where there is a real attraction (landscape, architectural
heritage, thermal bath) for tourists. Rurality as such is not enough for this purpose.
All sub-regions in question have deficiencies in management and entrepreneurial skills
which is exacerbated by the lack of guidance abilities in the municipalities.
The deficiencies of the wider defined infrastructure (road network, bicycle path, internet
connection etc.) is also a common characteristic of the sub-regions.
Opinions about current and future policies are different subject to the occupation, education,
and social profile of the respondent.
MARD office managers (officers of the county MARD bureau and the so called subregional managers) emphasised that from 2002 onwards all the applications and tenders are
available, but rural people have to use it effectively. The applications of recent years up to now
show the poor qualification of the applicants. So, the enhancement of participation and qualification
is needed in order to create a mainstream of development.
Naturally, the interviewees in the agricultural bureaus were familiar mainly with the running
agriculture-related policies. Their knowledge about pure rural-development programmes was rather
scarce. By contrast, sub-regional managers were uniformly well informed about each rural
development programme running in their respective regions. The regular training course organised
by MARD for these managers has an important role in this.
Interviewees confirmed uniformly that the effectiveness of current rural development policy
is reduced by the poor application skills, which hampers participation in development projects.
Fund allocation policy of the Ministry is felt to be consistent. Applicants have been
unsuccessful mainly due to lack of required own fund. Moreover lot of the potential applicants have
not a distinct profile yet.
We can conclude, that although Rural Development Fund as a resource can reach a plenty of
people via rural development managers, people have a very limited interest in application. This is
due partly to the very limited financial resource available for the support of individual measures. As
a result of this limitation, the required 50 % own share is far too much for the farmers,
entrepreneurs.
On the other hand there is a severe lack of entrepreneurial skills.
MARD supports alternative ways of farming instead of traditional one within the framework
of rural development, but people have doubts about these programs on account of previous bad
experiences. Of course some new profiles are successful.
Development of food processing industry counteracts the need of local employment, then
technical changes replace the working force. In addition small processors employing 5-10-20
persons also don't solve the problem. With technical development qualification of employees has to
increase proportionally. Developments try to enhance the quality of human resources against
number of employed people.
All of the interviewee admitted that agro-environmental policy applied in Hungary is
appropriate. The standards are just as strict as in any EU country. However the management of
household waste and sewage is not sufficient, there is no infrastructure for selective waste collection
and there are far to few cleaning sites.
69
Views related to involvement of different actors and institutional levels in rural policy
confirmed that the county is still an important level, which might provide tools for sub-regions to
remedy most significant problems like Romas and unemployment. This is mainly due to their solid
administrative, professional basis and past experience, which make them an indispensable factor in
rural policy.
Settlements on the other hand (local government) can very often play a decisive role through
sub-region-managers or local authorities. It was felt that the newly established sub-regional level
does not have the necessary tools for efficient functioning. Certain public institutions (e.g. building
authorities, secondary education, communal tasks, certain agricultural schemes) could function
more efficiently if arranged on the sub-regions’ level. The required funds for the setting up of the
institutions should be made available too.
In general higher administrative levels were felt to be not appropriate for the management of
rural development programmes. The lately introduced regional (NUTS 2) level was seen as a yetnot integrated part of public administration. The competency of this level is restricted to territorial
development rather than rural development.
Motivation is the most important in a sub-region. Development is not importable into a subregion from outside in case internal mover is missing. The sustainability requires locally generated,
inward motivation and bottom-up based developments
Interviewees agreed that current EU financial sources are not suitable for entrepreneurs.
Although much is heard about them, but in practice these funds are not accessible.
In 1999 during the elaboration of the SAPARD programme most of the local stakeholders,
civil organisations were interviewed. The proposals made by them have been incorporated into the
sub-regional SAPARD plans, so this feedback was successful. However, when it should have come
to the implementation of the SAPARD plan nothing has happened. Actually the policy pursued by
the government is the very opposite of the SAPARD principles. After the excessive expectations a
great deal of dissatisfaction, mistrust and frustration was triggered by the delay of the SAPARD
programme in the sub regions and questioned the credibility of such schemes to a great extent.
Rules of PHARE-funds differ from the needs of this level, since the fund is practically not
available for entrepreneurs. Availability, processing time, decision-making are extremely
cumbersome making entrepreneurial off take impossible. The high proportion of required own
sources also hamper the off take significantly. There are some well-known projects carried out in
the border regions within the framework of PHARE CBC.
The reputation of further EU funded pre-accession programmes such as ISPA or
INTERREG is rather limited since these programmes are based on a wider geographical basis.
On the other hand sub regions do not or are too sketchy to articulate their own profile.
MARD’s current opinion is that the state has to tackle some public tasks as research
institutes relating to rural activities (development special agricultural products, marketing activity,
education etc.). During transition period these kind of activities have been in virtually neglected.
The government aims to provide the Hungarian rural population (2,5 million people) with this type
of services .
Agricultural producers push for a more significant support of marketing and service cooperatives than they have been supported so far.
Both members of the general public and administrators of MARD supposed that more
measures should be launched on the local, or even municipal level. Specialised tourist services
should be supported and the norms of such services should be standardised (e.g. handicapped
70
tourism). Always the supported objective has to determine the administrative level, where the
measure is launched.
71
c) Experience in EU15
Case studies from EU experience
This section consists of firstly of case studies of diversifiers country by country. Secondly it
considers particular forms of diversification, popular in Western Europe such as agrotourism and
food processing.
UK diversifiers
Sally Robinson, from Yorkshire, UK set up her mail order business with the help of an EC
diversification grant. She decided to set up this type of business since it suited her rural location (a
hamlet with a population of 30, and no services) and fitted in with her domestic commitments which
included a bed and breakfast business. In spring 1999, she decided to sell bras after having looked at
the possibilities of garden furniture and jewellery. She identified bras as being similar to CDs and
books which are best-selling e-commerce items since “They are light to post and go through a
letterbox and yet they are not time sensitive like other fashion items”. After looking on the internet,
she found no comparable sites to that which she intended, selling a broad selection of brand name
bras in larger sizes which are only stocked in the largest department stores. The process of applying
for the grant and setting up the site took 6 months, and amplebosom.com went live on the net in
November 1999. Since then she has taken on 4 employees.
The business is run from converted outbuildings. Problems were faced in bra suppliers not
meeting her vision of an internet business so that she struggled to meet the rapid turnaround that
online purchasers expected. “We have difficulty getting stock in. The manufacturers want forward
orders, but I can’t predict for that”. To solve this she holds stocks of all items so that she can meet
expectations of next-day delivery. She also has a paper catalogue which accounts for half the
turnover of the business, but greater overheads. She also markets the website through PR, using
events as opportunities for publicity. An example of this was when she had coloured envelopes
printed with “amplebosom.com”. She turned postmen’s complaints to her advantage by issuing a
press release about them that led to her appearing on local television.
Within 14 months of starting the business she was breaking even. With regard to running the
business she says “ It is important to know your break even points, which I do......Starting an
internet business is like getting married – you go in expecting it will be alright and stick it out until
it is” On starting a business she says “ Don’t give up your day job, and be prepared to work for
nothing until you get your idea off the ground”(www.bbc.co.uk, 2000)
The bed and breakfast business has been running for 15 years. It also provides evening
meals and packed lunches if desired. Three farm walks have been created for guests. There are also
four self catering cottages, which are the result of a converted stone barn. One has one bedroom,
another, two while the other two each have three bedrooms. These last two cottages can be
combined to sleep 10. Guests in the self-catered accommodation can have dinner and breakfast if
desired and can pre-order groceries (valleyviewfarm.com).
This is an example of a successful diversifier who carefully researched her market before
starting the business, and considered her location when deciding how to operate and market the
business. Her ability to identify clients’ demands for next-day delivery and her way of overcoming
the problem with suppliers is illustrative of her knowledge of the market and her flexibility in
overcoming difficulties. She has an ability to turn a threat into an opportunity as demonstrated by
72
turning a complaint into a PR opportunity; such a characteristic is highly beneficial to the
enterprise. The use of old farm buildings for both the accommodation and business is an example of
utilising surplus resources.
Jenny and Brian have a 30 ha small holding. They had been contract rearing a flock of
ostriches, but at the end of the contract, the customer was unable to pay them. The cost of rearing
the birds was 50% greater than the revenue gained from their slaughter. Realisation of this led the
couple to look at becoming retailers. The move to becoming retailers incurred some costs for
packaging, refrigeration, marketing and food hygiene courses. With the help of a consultant, they
decided to sell directly to consumers at farmers’ markets. They realised that this could be a difficult
step initially since ostrich meat is considered to be a luxury product by consumers who also treat it
with some suspicion. To help overcome customer reluctance, they allowed people to try free cooked
samples as well as providing information about the healthy properties of the meat. Sales grew
quickly and they now regularly sell ostrich meat at farmers’ markets in the North West of England.
The move turned around what would have been a £50 loss per bird to a £150 profit
(http://www.pendle.gov.uk). The ingredients to the success of the diversified venture have been
consumer awareness and the creation of a marketing strategy.
An example of a successful diversifier in Scotland is George Lawrie who runs a 204 ha
mixed farm and is a founder member and director of Tayforth machinery ring. Supplying
machinery to the ring has justified having a full-time member of staff employed on the farm which
on its own would employ only a part-time staff member. One of the reasons for the success of the
contracting work is that many local farmers for whom they provide services are vegetable growers,
whose machinery and labour requirements tend to peak at different times to the on-farm arable
production. Thus, the demand for contracting services complements the on-farm requirements,
enabling full utilisation of surplus machinery and labour resources. Ring membership also provides
the farm with additional labour and machinery at peak times, so that full use can be made of
weather opportunities (http://www.saos.co.uk/index.htm). This diversification is successful due to
the complementarity of the contracting services with the agricultural business.
Graham and Caroline Hamilton farm 480ha in the Pentland Hills regional park, 15 miles
from central Edinburgh. Most of their stock are sheep, with a few beef cattle also raised. They
began to diversify in early 2000 by direct–retailing their meat, and in July 2000, started to sell their
meat at Edinburgh Farmers Market. Since then, the Pentland Hills Regional Park authority realised
the opportunities provided by collective direct-retail of produce, with this in mind they co-ordinated
the formation of ‘Pentland Hills Produce’, a group of seven farmers including the Hamiltons. This
initiative has facilitated the development of a label and logo for ‘Pentland Hills Produce’ for use in
promotion channels including a web site (www.pentland-hills-produce.co.uk) where each farmer is
able to individually promote their own goods under the collective banner. When advertised under a
collective banner, advertising costs per producer are greatly reduced. The group has also created its
own quality regulations, beyond those of farm assured produce. This has helped in marketing, both
as providing additional assurance to customers and in defining a regional identity for the products.
For the Hamiltons, diversification through direct retailing has resulted in direct benefits to the
agricultural operation since the price fetched per lamb has increased, augmenting overall net farm
income by 30%. One of the reasons for this has been that previously they had tended to be penalised
by processors to whom they sold the lamb since the breed they run tends to struggle to meet weight
and conformation regulations stipulated by processors. Selling directly to consumers has meant that
processors have been removed from the chain, thus, penalties are not incurred
(http://www.saos.co.uk/index.htm). The lessons to be learnt from this enterprise are that collective
action can be beneficial for marketing farm products both by sharing advertising costs and through
the ability to create a local brand.
73
A case study of a business which suffered some problems and tried to overcome them is that
of Jim and Kathy who have four agricultural businesses. They bought into a family business which
built, serviced and hired out off-road vehicles for the leisure market and operated on land owned by
one of their family businesses. The business had several shareholders, of which Kathy and Jim were
the only ones working in it, alongside employees. The manager had some independence since Kathy
and Jim concentrated on their other businesses. This strategy led to the business having financial
difficulties and an extension agent visited them to try and overcome the problems. It became
apparent that the problems had arisen due to no-one knowing accurate costs or profitability for any
of the three parts of the business, inadequate administrative controls, a lack of clear responsibilities
for different parts of the business, a lack of leadership and direction felt by the staff due to Kath and
Jim rarely being there, the business was product driven with little account taken for clients and their
needs, and the manager lacked sufficient administrative, staff management and marketing skills.
These problems appeared to have arisen as a result of Kathy and Jim assuming that the manager
shared their entrepreneurial attitude, which he did not. As a result of the rare visits of Kathy and
Jim, the staff were unwilling to share information with them that could be poorly received. Finally,
Kathy and Jim had dealt with the business in a reactionary way rather than having a long-term
strategy for it. The extension agent helped them to develop a strategy and to identify staff who
lacked skills or had a poor attitude. The result was that two staff members were ‘released’ and
persons with stronger skills recruited in their place. Computerised accounts were installed,
providing a more accurate portrayal of the business’s costs and profitability. Finally, the enterprise
was viewed from the angle of the client and presentation and marketing were improved upon
(www.pendle.gov.uk).
Ireland
In an Irish survey, only 5% of farms were full-time farms, the rest were diversified, mostly
through off-farm employment. The research included several case studies such as Michael and
Eileen who have a 32ha beef farm, a small pub and shop and provide some agricultural contracting
services. The pub and farm had come down through the family. The pub is small and provides for
everyday living, income from contracting is used for ‘extra costs’ while the farm income is
reinvested in the farm. With these sources of income, they feel that they have a reasonable standard
of living (Kinsella et al,2000). Thus, in this case, the diversified enterprise (pub) was inherited and
only the contracting enterprise started by the household themselves. It appears that the motivators
for diversifying have been to provide income for the family to survive since the farm income is used
purely for reinvestment on farm.
Another couple, Sean and Diana have a 30ha farm which was inherited. Before inheriting
the farm, Sean had worked as a builder and had gained skills in the trade. In the first five years of
having the farm, while building it up, Sean worked as a builder off-farm. Since then, he has
provided construction services according to demand and his inclinations. However, as the farm will
not support the couple on its own, construction provides a means to gain additional income as
necessary. Diana, has an off-farm job in a local shop, which also provides additional income
(Kinsella et al,2000). This couple illustrate the need for diversification where a farm is too small to
provide sufficient income. Previous skills and experience have been an important influence in
determining the form of diversification. Since the study mentions that he is asked to provide
construction services, this indicates that business comes through word-of-mouth, which suggests
that client relationships are important in maintaining demand for services since in a small rural
community, provision of a poor service would rapidly eradicate business as word spread. Thus,
success in this case is linked to good relationships with customers and to the provision of a good
service.
74
Sweden
A Swedish study indicated that in many cases, diversification occurs as a result of low farm
incomes. Often this is because the farms are too small for specialisation to be a successful strategy
and in some cases farming strategy itself is somewhat changeable. For example, one cited
household generated most of its income from employment. The spouse was about to open a cloth
shop with a friend of hers in order to earn more income. Previously, the household has been partners
in a racehorse which generated some income, afterwards they were partners in two breeding horses
from which they earned little income. At the time of being surveyed, they had just sold their bulls
but were planning to restock. At peak times they would like to be without stock but at other times
they feel that they would like to expand the farm to the point where it could support them fully
(Djurfeldt and Waldenström,1999). Insecurity about the future of farming and incomes related to it
such as from diversified enterprises like retail outlets of farm produce, has led some households to
gain income from off-farm employment in order to be sure of an income source. This is illustrated
by one Swedish household which made the decision not to expand their vegetable cultivation and
retailing business in which both the head of household and spouse could work full-time, but rather
for the spouse to continue holding off-farm employment in order to provide a secure income source
(Djurfeldt and Waldenström,1999). Thus, here, pessimism appears to reign over both agricultural
and diversified enterprises. For some households, risk aversion is preventing them from expanding
diversification, preferring instead to have a secure income from off-farm employment.
In Sweden, diversification has been encouraged by allowing profits and losses to be
exchanged between an agricultural enterprise and a diversified enterprise, providing tax advantages.
At the beginning of the 1990s, tax legislation changed such that it was no longer possible for wages
and earnings to offset losses in the farming business, resulting in the cessation of an implicit subsidy
to farm households with off-farm employment. Thus, diversifying through enterprise creation has
been a means by which this loss can be overcome (Djurfeldt and Waldenström,1999).
Germany
In Germany, direct marketing of farm products has been on the increase, largely due to an
increase in demand for direct marketing on the part of consumers who in the wake of food scares
are becoming increasingly concerned with the origin of their food. In Eastern Germany, large farms
which are mostly co-operatives have become increasingly concerned with direct marketing,
particularly of meat. Direct marketing is dependent on locality since it tends to be more successful
in economically thriving places where consumers are more concerned with quality than price in
contrast to disadvantaged areas which require a greater sales effort. Thus, this type of
diversification, unless on a large scale with a good distribution network, is not necessarily suitable
for rural development since in areas most in need of development, it is more difficult to make the
enterprise successful. The average direct marketing farm in Germany employs one worker in the
enterprise, thus, it is useful in creating jobs (Wirthgen and Kuhnert, 1997).
Agrotourism in UK, Spain, Denmark
75
A study of farm-based accommodation in three English counties (Dorset, Lincolnshire,
Staffordshire) suggests that in some cases, agricultural policy which limits agricultural production,
such as the imposition of quotas, can be a factor in the decision to diversify.
For example, Mr. P, who farmed 30ha with a 30 cow dairy herd started a bed and breakfast
and self-catering accommodation enterprise as a result of dairy quotas limiting his capacity to
expand the dairy herd, thereby undermining the agricultural business’s chances of survival. Bed and
breakfast was started in 1985 (quotas were imposed in 1984). As farm income declined, a spare
building was converted into self-catering holiday accommodation in 1987, as part of a strategy to
stay farming. Now the accommodation business is becoming the main source of income and further
conversions of redundant buildings are planned (Evans and Ilbery, 1992).
Accommodation enterprises are frequently initiated by a spouse. This is partly due to
spouses providing some labour to the farm, which can be combined easily with an on-farm
enterprise. Often farm houses in UK are large so that accommodation provides a means to gain
income while utilising it fully. It can also provide a means to counteract feelings of loneliness
experienced by some farm wives during peak periods of farm work when heads of household
typically work long hours but spouses are still required to be on the farm. It is also used
occasionally to counterbalance the effects of children leave home or even when they start school
(Evans and Ilbery, 1992).
A study of agrotourist enterprises in Catalunia indicated that the main reason for initiating
the enterprise was to increase agricultural income and, secondly to utilise surplus resources i.e.
spare rooms. The synergy between agriculture and agrotourism results in low entry barriers and
makes it a logical choice of diversified enterprise. Agrotourism is generally preferred over rural
hotels since it utilises the farmhouse, and thus, tends to have low entry barriers due to the lower
level of investment required. It is also chosen since it provides the spouse with employment, saving
her from having to seek a job off-farm. A participant in a survey carried out explained the choice of
enterprise “ I see myself capable of cleaning and cooking, this I do well, because of this I prefer to
do something with rural tourism over other activities”. (Francès and Méndez, 2001).
Under the objective 5b programme in Denmark, one of the seven policy measures was that
of promoting the generation of alternative income to farm households from agrotourism. Between
1990 and 1993, 68 farms received EU and national investments subsidies to this end. The farmers
themselves contributed 56% of the total investment. Mostly finance was used to renovate or
establish accommodation, and some to provide tourist facilities such as tennis courts, farm shops,
farm museums etc. Generally, the larger farms which generated greater agricultural incomes were
those which gained higher incomes from agrotourism. This was postulated to be due to them having
larger scale activities and a greater capital availability. Households which already held off-farm
employment tended to be less ambitious with regard to the scale and scope of their diversified
enterprise. Some of the farm households participating in the programme found that their own
investment contribution was greater than they expected. The main reason for this was put down to a
lack of advisory services during the setting-up period. Many of them allocated more time to the
enterprise than expected. The very small islands in Denmark are often isolated from consultants and
other intermediaries and as a result many missed out on the potential of the programme (Hjalager,
1996).
. More than half of those participating in the programme experienced marketing problems
during their first and second years of operation. For the enterprise to be in a holiday accommodation
brochure is expensive, making it an unattractive option for many farmers. The cheapest way to
market is to put up a sign on the road, near to the house, but this is not practical for more remote
locations. One group of farmers created a network with farmers in Southern Sweden, printing and
distributing brochures. This came about with the help of local consultants and from funds from
76
another supportive programme. The research suggests that without a more organised approach, rural
tourism is limited in its success as a diversified enterprise. Joint initiatives are needed for marketing
and the provision of activities and services for tourists, including the marketing of regional foods
(Hjalager, 1996).
Agrotourism is a convenient means to diversify in that a spouse already has some of the
necessary skills, and so can feel capable without attending courses before starting the enterprise.
This helps to reduce entry costs, as does the potential of using surplus rooms in a farmhouse. it
appears that success can be aided by collective marketing, either jointly producing brochures or
sharing websites. The example of co-operation with Swedish and Danish farmers demonstrates a
means to capture a larger potential market while sharing advertising costs. The co-ordination of
investment in accommodation itself and tourist attractions is a positive step towards encouraging
customers to a region.
On-farm processing
In a survey of Germany, Belgium, France and UK, on-farm processing was not found to be
frequent amongst diversified enterprises. It has been estimated that in the UK, 1.6% of all farms are
engaged in food-processing. For Germany, the percentage of farms engaged in food processing was
1.9%. On–farm processing requires a considerable entrepreneurial ability and asset base. This is
because of the required volume of raw material supply and investment in equipment required. Thus,
it is not usually a small-scale operation for peasant farmers. The processing enterprises generally
have a sole-trader or partnership legal form with company status being more common in UK. For
all four countries, the processing enterprise made an important contribution to total household
income. In France and UK, processing contributed to over 50% of total household income, whereas
in the other countries, the enterprise was largely complementary to agriculture with 32% of income
being generated from the enterprise in Germany and 28% in Belgium (Revell and François, 1997).
One of the greatest bottlenecks to processing was the difficulty of obtaining markets. This
was considered to be due to the initial production level being relatively low, and small quantities
being difficult to sell beyond the close vicinity of the enterprise. All producers identified the main
factors contributing to successful sales were word of mouth and ‘being a good salesman’. Business
success depended on product quality, healthiness and uniqueness coupled with a distribution
network.
Employment issues
With regard to employment in processing enterprises, Belgium created the least, with largely
part-time work (0.6 FTE17s on average) with France and Germany providing between 1-1.5 FTEs.
In the UK there was a large variation but on average a higher use of 6FTEs. There were some large
enterprises within the UK sample, resulting in some skewness since between 40 and 50% of the
businesses employed no additional, permanent staff, and between 30 and 40% employed only
between 1 and 4 staff. There is an observable relationship between the size of the processing
enterprise and the number of employees. Businesses which increase in size beyond a certain
threshold require larger increments in turnover per additional staff member employed. This is
probably due to higher labour productivity as a result of labour-capital substitution. The greatest
17
Full-time equivalent
77
effects on employment such as taking on new employees, use of spare family labour etc are
observed at early business expansion for medium size companies or start-up (Revell and François,
1997). This suggests that supporting expansion and start-up could be the most efficient strategy for
encouraging job creation in rural areas since for larger companies a greater investment would be
required in order to create jobs. Research indicated that once processing commences, it increases in
its contribution to total household income, resulting in a shift away from agricultural activity.
This is said to also happen with other forms of diversification which tends to have an effect
on agricultural production, making it more extensive, and, therefore, lowering its labour
requirement (Revell and François, 1997). Farm accommodation appears to have little impact on job
creation. In a UK survey of 200 farm-based accommodation businesses, it was recognised that
generally, they rely on self-exploitation of family labour, with 78% of surveyed enterprises using no
external labour resources. Only three farms employed full-time labour for accommodation, all of
which had large licensed camping and caravanning sites while five business had full-time workers
who divided their time between agricultural and accommodation enterprises. All other employees
were casual or part-time. The reasons for the lack of employment of external labour in these
enterprises may be attributed to; the businesses being started in the first place in order to utilise
surplus resources including labour; some enterprises such as small camp sites have a low labour
requirement; younger household members (schoolchildren) can provide labour during holidays
which coincide with peak periods and; finally, in some cases profit would be eroded by paying
wages (Evans and Ilbery, 1992). A Spanish survey of 125 farms confirmed these findings with only
2 full time employees in agrotourist enterprises, most employment in agrotourism being for family
members, particularly wives and grandmothers (Francès and Méndez, 2001). A Danish survey or 67
agrotourist enterprises indicated that no full-time jobs had been created nor were likely to be created
in agro tourist enterprises, with employment being restricted to part time jobs and some subcontracted work (such as for cleaning). Generally labour was provided by the spouse and older
children (Hjalager, 1996).
Conclusions
The case studies bring to light the importance of marketing in determining the success of an
enterprise. In particular it is important to research a market, and if necessary to adopt a strategy to
overcome foreseen difficulties such as in the case of selling ostrich meat. The example of
amplebosom.com shows how careful market research before starting an enterprise is a key to giving
a business a good chance of success. She was particularly adept at marketing, having the ability to
use a threat from complaints into a PR opportunity. Even with her bed and breakfast business, there
area added extra which may attract consumers such as the ability to order groceries in advance to be
delivered to the accommodation and the development of farm walks for guests. Marketing was
identified as being important for food processing, this could be aided by concentrating on product
quality, healthiness and a good distribution network. Potential diversifiers who wish to be
successful should address the need to be a good salesman and develop a potential market. Cooperation with other farmers in a region can be a successful way in which to advertise a product or
service without an extortionate cost as illustrated by the Scottish Pentland produce initiative and
agrotourist enterprises in Denmark. Co-operation does not have to be restricted to the national level
but can be beneficial at an international level such as the Danish/Swedish initiative. A concerted
and combined effort can help to create a regional identity for these goods or to co-ordinate tourism
such as by providing attractions as well as accommodation, as illustrated by the Danish example.
Group action can be useful for maximising resource use such as in the case of the Scottish
machinery ring.
78
The use of consulting or extension services can provide a lifeline for those considering
diversifying, whether as an aid in establishing a market or to aid in application for funds. In the
example of ostrich meat, a consultant aided in finding a way to retail the meat and helped farmers
come together to market their services in Denmark. In Denmark, a lack of consultancy was blamed
for some households providing more finance themselves than expected.
However much marketing and consultancy services have been used, it is important to have
some business sense and a strategy for the business. This includes knowing what the breakeven
point is such as in the case of Sally Robinson, and monitoring the books, so that problems can be
quickly identified and action taken if necessary. The case of Kathy and Jim, illustrates the
importance of monitoring costs and profits in ensuring the survival of an enterprise. It also indicates
the importance of frequent monitoring of the day to day running of the business, where it is
managed by someone else, and the need to recruit a manager with similar ideals or one who has
adequate skills.
These ingredients for success identified through western European cases such as marketing,
consulting services, client relationships, and monitoring of the financial side of the business are all
potentially transferable to CEECs. Consultancy or extension services could be offered to those
considering diversification to help them to identify a market and choose the product or service to be
offered. They could also help to establish collective marketing strategies where suitable and advice
in business planning, strategy development and book keeping. Such advice could be provided on an
on-going basis This advice would not only aid in business start-up but would aid in business
survival.
EU policies and programmes relating to diversification
Greece
Some types of non-agricultural diversification have been promoted such as agrotourism and
small food-processing units. This has occurred through programmes such as LEADER. However,
most of this funding was used for infrastructure, especially the road networks rather than promoting
diversification per se. It could be argued that the promotion of diversification has not achieved its
targets (Psaltopoulos and Skuras, 2000). The Regional Development plan of 1978-1980 contained
special programmes to increase pluriactivity. However, socio-economic constraints in mountain
areas reduced the effects of investment schemes which in mountainous areas were taken up at a rate
below national average (Ministry of Agriculture, 1999). Regional Operational Plans in mountainous
areas tended to concentrate on improving remoteness by improving the road network while in an
effort to reduce human capital constraints on the uptake of investment schemes. Integrated
Mediterranean Programs (IMP) and Community Initiatives such as LEADER have been more
successful at promoting entrepreneurship and have also aided in modernising the institutional
framework, providing the required services and experience to the rural population (Psaltopoulos and
Skuras, 2000).
One of the difficulties experienced in mountainous areas of Greece is that the local
population tend to have low incomes and therefore, cannot really afford to take the risks associated
with entrepreneurial activity. This problem has been reduced to some extent by the provision of
significant rates of assistance for investments and an improved infrastructure. Leader and IMPs
have been important in providing institutions which provide insights to management, provision of
‘seed’ money, finding potential entrepreneurs, providing investment and market information,
assessing prospects of success and developing human capital. Such incubator organisations have
been considered to be successful in Greek mountainous areas (Psaltopoulos and Skuras, 2000).
Improvements to infrastructure (both communication and transportation networks) have
reduced the constraints of accessibility to suppliers and customers. On the other hand, it has resulted
79
in the local economy being ‘opened’, increasing inputs to the areas and decreasing the output of
several local sectors (Psaltopoulos and Skuras, 2000).
Trends in decentralisation have led to active participation by local government in developing
Greek mountain areas which have set-up development companies, information-dissemination
agencies and entrepreneurial assistance schemes. The engagement of local government has been
particularly beneficial in the design of appropriate local-development strategies and the mobilisation
of local development actors(Community support framework).
Policies which have been implemented to promote entrepreneurship have included
integrating regulatory, fiscal and other measures (such as setting up one-stop shops) in order to
lower the administrative burden of business start-up. The promotion of innovation in SMEs has
helped to achieve increased entrepreneurship and the promotion of flexibility in the labour market
has increased employment opportunities for some (Community support framework).
Portugal
There are several projects being implemented which will aid diversification. These include a
project promoting tourism in rural areas. This is to be achieved through aiding applications to the
authority managing the tourism project. In addition education sessions and publications are to be
provided and a database is to be created to aid in monitoring of progress. An internet page is also to
be developed (Direcção Geral de Desenvolvimento Rural, 2000).
A second project aims to provide incentives for increasing the use of social capital
contributing to the multifunctionality of agriculture and diversification of activities in rural areas.
Actions to achieve this include the creation of promotional entities, internal circulation of
proceedings, collaboration in the development of a database characterising 150 projects. An action
plan for 2003 is to be developed, and projects are to be analysed. Development activity is to be
evaluated as are executive and financial materials appertaining to action plans (Direcção Geral de
Desenvolvimento Rural, 2000).
Another project is concerned with the identification of craftsmen and craftsmanship and in
improving awareness of them and their social value. Its aim is to contribute towards an adequate
definition and adjustment of policies providing incentives to the sector and to reinforce social
consciousness of the importance of arts as cultural identities and dynamic economic instruments at
local level. It also sets out to generate accurate statistics for the sector. Actions to achieve this are
the creation of a database for the sector and a webpage. Meetings are to be held with the national
commission, internal publication of proceedings is to occur and development activities are to be
evaluated (Direcção Geral de Desenvolvimento Rural, 2000).
Promotion of the use of linen and wool which can contribute to the revitalisation of small
rural communities whose economic survival nestles with this type of artisanal activity which
complements agriculture. Transmission of appropriate skills between women is to be encouraged.
Such artisanship has potential to aid in establishing tourism in rural areas. Actions to achieve these
aims are to prepare a brochure, and a webpage. This is planned to be funded by LEADER
(Direcção Geral de Desenvolvimento Rural, 2000).
Using such financial incentives as LEADER, INTERREG etc, various projects have been
initiated within the area of rural museums. This should aid in attracting visitors to rural areas,
boosting the local economy.
A final project is concerned with the promotion of quality products using instruments such
as protected denomination of origin, protected geographic origin, guaranteed traditional speciality.
The support of organic agriculture, and the implementation of organic production regulations at
80
national level are to aid in the process. In addition to these measures, there is to be support for the
development of a control and certification system for products obtained from protected areas. There
is also to be development of other ways of valuing Portuguese products and the encouragement of
private control and certification organisations. The objectives of the project are to increase the
volume of traditional products on offer, whether by diversifying the range of products or by
increasing the number of operators. The number of products from organic production and extensive
agriculture are to be increased as are the number of producers in protected areas (Direcção Geral de
Desenvolvimento Rural, 2000).
Actions to initiate this include proposals for means of recognising national and community
traditional products, accompanying the development of registered products with a valuation of the
economic impact of their production and commercialisation. Specification documents are to be
modified.
Within the project, other systems of increasing the value of traditional alternative products
are to be developed and those which are in existence are to be complemented. Support is to be given
to the development of organic agriculture, integrated protection and other modes of production.
Inspection and audit of private organisations of control and certification is to be carried out.
Promotion and increasing the value of national traditional products is to be aided through
encouraging participation in demonstrations and exhibitions, publications of inventories and
catalogues. The creation and maintenance of a database is to be carried out in order to monitor
progress. Gastronomy and national culture are to be nurtured in order to encourage the valuing of
traditional products. Publication of names of producers of products with protected names and
providing other items of interest such as regulations under which production is conducted aid those
seeking products to locate them and provide a better appreciation of the quality of the products.
Sales are to be further enhanced by promoting e-commerce (Direcção Geral de Desenvolvimento
Rural, 2000).
An evaluation of the implementation of policy measures within the 1994-1999 frameworks
for community support (FCS) indicated that there is an inadequate conceptual framework for
measures and actions due to the lack of studies such as sectorial, regional and socio-eceonomic to
identify the requirements of certain regions, sectors or target groups. This meant that the programs
were not appropriate for meeting specific needs. Insufficient co-ordination resulted in inadequate
information, complex bureaucratic procedures and some programmes coinciding with each other.
(Roca, 2000)
The 2000-2006 FCS learnt from previous experience and considered it to be vital to
decentralise competencies and resources to county level and to increase the efficiency of the
decentralised government services at regional level and to harmonise sector –related and spatial
development programs
In 1994-1999 LEADER II financed various actions in Portugal such as diversification of
economic activities, including rural tourism, micro and small enterprises, craftsmanship,
valorisation and commercialisation of agricultural products. One example of implementation of this
programs was in the Lima valley where the local action group (ADRIL) focused on programs
related to tourism and related activities, this was both due to the rural tourism potential of the area
but also because ADRIL was founded by an a non-profit private association and marketing agency
of owners of old manor houses in the region (Roca, 2000). This could indicate that local action
groups may contain biases where founders have vested interests. In the Lima valley virtually no
funding was given to producers of local agricultural products. There has been little evidence that
rural tourism is an additional source of income for farmers, rather, most of those engaged in this
activity are active or retired professionals, entrepreneurs and highly qualified staff. It has been
considered that there has been insufficient action to improve service provision such as health care,
81
education and culture which are required in the context of increasing farmer diversification (Roca,
2000).
The program for the creation and modernisation of SMEs and microenterprises had 3 main
spheres of action namely: craftsmanship, restoring and valorisation of traditional arts and crafts
including agricultural products, commerce and distribution of goods and services, especially craft
products, improvement to social, environmental, cultural and recreational living conditions. The
main beneficiaries were individual entrepreneurs. In the Lima valley there were only a small
number of applicants for these funds, largely because that the local target groups of rural artisans
and non-agricultural entrepreneurs represented minor groups of development stakeholders,
bureaucracy, low education levels of the potential beneficiaries, lack of information about the
programme and lack of assistance in submitting applications. The LEADER II program was also
financing rural craftsmanship, thereby creating an overlap and competition between programmes.
Diversified farm households benefited to some extent from another programme entitled system of
regional incentives (SRI) which created and modernised SMEs, although the majority of recipients
of these funds were urban, some farm household members obtained employment in these
enterprises, particularly younger members (Roca, 2000).
The Transfrontier Programme between Portugal and Spain when implemented in Portugal
included a measure for agriculture and rural development. Within this, diversification was promoted
as was valorisation and commercialisation of agriculture, forest and hunting products, marketing
and promotion of agricultural products (Roca, 2000)
Local development initiatives have proved fruitful in reviving local economies in rural areas
in Portugal such as The South-West Alentejo Local Development Agency (ESDIME) based in
Alentejo which has been viewed as being the least developed rural region in the European Union. It
suffers from low agricultural productivity, very large landholdings, old population, an
underqualified workforce and a lack of entrepreneurial initiatives. ESDIME has focused on
increasing human capital and attracting professionals and entrepreneurs to settle and invest in the
region. Initially it worked almost exclusively as an advisory body, providing advice to entrepreneurs
wishing to start micro-enterprises in the area. A little later it expanded to increase the area which it
covered and focused on aiding small-scale entrepreneurs and unemployed women. In addition it
organised vocational training activities and encouraged entrepreneurship amongst the younger
populous. It was funded by EU financing received for Objective 1 regions but now it supports itself
through income generated by its consultancy and vocational training services. Entrepreneurship
amongst the young has been encouraged through discussions with experienced professionals, visits
to businesses, short-term work opportunities in local firms and educational games. Along with a
local government authority, ESDIME, persuaded an electronics firm to build a new factory in
Alijustrel after mining activities ceased in the town. ESDIME was responsible for training the new
local employees who had previously been unemployed. With regard to promoting entrepreneurship,
ESDIME offers consultancy services such as pre-feasibility and feasibility studies, legal advice and
assistance in making grant proposals. Between 1989 and 1997 it has aided the establishment of
almost 200 new micro and small enterprises. Within its responsibility of managing the LEADER
program in the region, its services to entrepreneurship also encompass improvements to marketing
strategies by focusing on local identity, goods and services and forging links with the external
market (Roca, 1998).
ESDIME has developed a training programme for agriculturists wishing to diversify their
activities. The training courses cover such subjects as agrotourism, the production of traditional
goats’ cheese (Roca, 1998).
Ireland
82
The main form of diversification (over 50%) is in the form of rural tourism. A survey of
tourists undertaken in county Galway indicated that their main activities were walking, viewing the
scenery, landscape and historical sites. The integrated rural development database indicated that
there were approximately 200 farmers with milking goats, of which only 30 produced cheese and
yoghurt. Diversification has been encouraged both indirectly by CAP reform in the 1980s which
introduced quotas, which led farmers to examine the potential to utilise land, buildings and other
resources for alternative enterprises (Connolly, 1999). The operational program for rural
development (OPRD) between 1989 and 1993 and 1994 to 1999 masterminded by the department
of agriculture, food and forestry and partly funded by the EU provided grant aid for investments in
alternative enterprises such as rural tourism and horticultural enterprises. Teagasc aided in the
promoting these enterprises and providing training for new entrants(Connolly, 1999). Several
groups market B&B for their members, thereby reducing the costs that would be faced if marketing
was on an individual basis. Such groups include Town and Country Homes, Irish Farmhouse
Association, Irish Country Holidays. They facilitate co-ordinated development and reduce the cost
to the individual of promotion and marketing. Community tourism facilitates the pooling of
resources which can result in a greater range of potential activities for guests in addition to
accommodation. At present the rural tourism sector necessitates a co-ordinated strategy rather than
the fragmented small-scale initiatives currently existing. Greater co-operation could result in a
distinct Irish rural tourism package which could provide a greater potential for positioning in the
marketplace and for developing a strategic marketing approach (Commins, 2001). LEADER funds
were used to support the collective body of Irish Country Holidays which was to develop
community rural tourism through building up a partnership approach and to market new products
and increase the number of visitors. The main vehicle for this was a central marketing and
reservation system which was the main recipient of LEADER funds. However, when progress was
monitored at the end of 1999, it appeared that the marketing project had had little impact. This
failure to meet targets was put down to a number of factors such as a lack of continuity in staff in
the organisation, a lack of co-ordination of how agencies aided the organisation and a lack of
distinction between the board and staff. The organisation also appeared to be too dependent on
LEADER funding for it to be viable and for its development.
Irish Farmhouse Holidays Limited (IFH) proposed to LEADER the provision of rural
development through the provision of tourist accommodation. The aim was to develop, upgrade and
monitor rural accommodation, regenerating rural areas in the process. The increased income of the
accommodation providers would go back into the rural community as well as the use of support
services such as food putting money into the local economy. Most of the grant assistance obtained
through LEADER was used for designing, printing and distributing brochures. In the last two years
a new reservations package was installed along with new hardware. A website was also set up and a
video made This project met its targets with considerable upgrading and expansion in both
accommodation and marketing. Funding from LEADER enabled marketing to extend across Europe
and the USA. IFH joined with Town and Country Homes under the BORD Failte Joint Marketing
Initiative in promoting accommodation. Both organisations were aided by Bord Failte in attending
trade promotions. Evaluation of LEADER II indicates that support to rural tourism should be better
co-ordinated with regional and national tourism policy and priorities. One recommendation was that
“Go-it-alone” marketing supports should be avoided in the future (Brendan Kearney and
Associates).
The department of agriculture, food and rural development has a scheme for the
development of the potato sector. It provides funding for capital investment in new or improved
storage and marketing facilities such as grading, packing, washing and weighing equipment for
commercial potato growers. In order to receive grants, investment proposals need to demonstrate
viability and adequacy while applicants require appropriate skills, competence and compliance with
83
minimum environmental and plant health standards. Types of investment have been prioritised in
the following order: temperature controlled storage and associated equipment, brushing equipment,
grading, packing and weighing equipment, washing equipment and ambient storage and associated
equipment. The grant rate is 35% with grant ceilings in place having a minimum of €10,000 and a
maximum for purposes of grant calculation of €150,000 (DAFF,2001).
There is also a measure for rural development containing 3 sub measures the first of which is
for area based rural development initiatives. Funding is for area-based groups to implement
approved business plans covering a range of elements including agri-tourism, local crafts and
services, small scale food processing. The grant rates vary according to the type of project while
eligibility criteria are based upon the rules for LEADER II. The measure is co-funded by EAGGF
fund. The Western Investment Fund provides loans and take equity in a small number of
investments in new and growth-orientated small and medium sized enterprises in the Western
Region. The Western Development Commission determines the number of projects to gain funding.
Applicant enterprises need to demonstrate future profitability and viability combined with an ability
to pay dividends on shares, interest on loans and to make repayments on loans. The Rural
Development Fund provides finance for research (DAFF, 1999).
The government aims to provide a comprehensive pro-active information service in future’.
This is to be implemented by the publication every two years of a comprehensive directory of State
services available to rural communities. A website is to be established in order to provide
comprehensive information and continual updating of developments. County Development Boards
are to provide access to and information on services to rural communities. These Boards are also to
identify the local information requirements and the most appropriate means by which they can be
delivered, including ‘one-stop-shops’ for public service information (DAFF, 1999).
Employment issues are to be addressed by several means. These include the identification
and promotion of diversified activities while providing training, marketing, processing and
distribution support. Targeted training for smallholders to take up off-farm employment is to be
implemented.
It has been considered that in rural areas small and medium scale developments will
continue to be the main source of jobs creation. Initiatives to promote such developments will
continue as part of Government policy. Attention is being paid to encourage services industries in
rural areas due to the fact that they are considered to be the sector with the fastest employment
growth. The County Enterprise Boards, local action groups approved under LEADER, Area
Partnerships and Community Groups have demonstrated that local focus can generate ancillary
activities, thereby increasing local value added. The County Enterprise Boards can make
contributions at local level to increase job creation since it is responsible for micro-enterprise
support. This helps to integrate such developments into the larger planning process at regional and
national levels (DAFF, 1999).
Human resources have been identified as being drivers for diversification since the
availability of a well-educated workforce attracts new income and job creating opportunities to rural
areas. Information technology skills have been gaining increasing importance. With these issues in
mind, the government is committed to providing a ‘comprehensive and all embracing education
system... This will include the provision of distance education and outreach facilities with an
emphasis on technological supports and resources (DAFF, 1999).
Spain
The LEADER (Liaison Entre Actions de Développement de l’Économie Rurale) II program
contributes to maintaining rural populations in sustainable and comparable socio-economic
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conditions, promoting and supporting innovations in rural activity which generate incomes and
employment while respecting the environment and natural resources. The initiative works at county
level in rural areas with the worst problems of socio-economic development, particularly low
incomes, depopulation, high proportions of elderly in the population. It works through interrelated
actions which are based upon the specific requirements of that region. The key of the programs has
been the participation of rural populations through local action groups which provides autonomy
and flexibility in implementing the program so that it can be tailored specifically to each rural
area(http://www.redr.es)..
The national programme PRODER (Programa Operativa de Desarollo y Diversificacíon
Económica de Zonas Rurales) in Objective 1 regions has objectives which mostly coincide with
those of LEADER II. These are to increase development in rural areas through economic
diversification which will aid in raising incomes, social wellbeing of inhabitants and ensuring
conservation of natural resources. In order to achieve these objectives PRODER supports and
subsidises rural development such as through encouraging tourism, supporting small enterprises and
craftsmanship and service activities and valorising of agricultural and forestry production. All these
supports could aid in promoting agricultural diversification (http://www.redr.es).
Galicia has an additional programme called AGADER (Axencia Galega de
desenvolvemento Rural(Galician agency of rural development). It is the only such autonomous
region in Spain to have such a programme funded by its own council. The programme enables the
whole territory of Galicia to be covered by rural development programmes. It aims to encourage
and co-ordinate rural development and to improve living conditions within the territory. This
includes the monitoring of and following of LEADER and PRODER programmes, promoting cooperation between private and public agents in development (http://agader.xunta.es/).
La unidad Española del observatorio europeo Leader has an objective of exchanging
information and experiences between groups involved in rural development. To achieve this it has
developed a network which includes in the first place sending information and news of interest by
e-mail to groups of and associated networks and the creation of a webpage with relevnat
informationm such as data relating to LEADER and PRODER. It also produces a newsletter,
organisies teh formation of groups, has repeated contact with groups through visits and activities of
Antenas Regionales del Observatorio(www.redr.es).
The main objectives of Red Española de Desarollo Rural (REDR)(Spanish rural
development network) are to defend a model of Rural Development which is integral and
sustainable using a vision of what development is in rural areas. It is not strictly limited to
instruments such as leader and Proder, rather with a broader viewpoint which incorporates all the
elements that contribute to development. It aims to improve awareness of REDR by putting
forward its proposals at all decision fora which are directly applicable to its model of rural
development.
The work plan for REDR in 2001 was to transform REDR into a true network of networks,
create conditions to exercise the paper of representation of associated groups at different levels,
improve the actual services provided, augment its resources, use the image of REDR in different
means of communication (www.redr.es).
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5. INTEGRATED STRATEGY
a) Optimal Policy Mix
Policy proposals for Hungary
Rural development priorities in rural sub-regions
Our proposals are based on the administrative sub-regions which at the time of creation took
into account each regions characteristics. These characteristics combined to make up the current
rural developmental provisions.
Three main types of sub-regions can be classified: developed, medium, and undeveloped.
1.
The developed group is made up of only ten rural sub-regions. With the exception of
one, they are all non-agricultural. Their main characteristic is that they are found in the developed
regions, usually Transdanubia. Another defining characteristic is the tourism in the region, since
thermal baths, lake Balaton and the surrounding countryside attract tourists. The ratio of
agricultural employment is below the national average. The unemployment rate is relatively low as
the infrastructure is more advanced than the rural average.
Based on these facts we set up our priorities:

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The development of the agriculture and processing of agricultural goods by taking advantage of
the natural qualities of the land should be in the focus of the development projects.
Encompassed within these parameters are the development of traditional wineries, and the
maintenance of the natural surroundings.
The regions’ characteristics are also favourable for rural tourism (the infrastructure is quite
advanced, as well as having a long established traditional hospitality.) Preserving the traditional
qualities of village life is also a top priority.
2.
Approximately one third of the medium group is made up of agricultural subregions. The unemployment rate is around the national average, however the main problem is with
the long-term unemployment rate. The number of state welfare recipients is also not significant.
In this category the difference between agricultural and non-agricultural sub-regions is not
only based on the size of the agricultural employment but also on the population density and service
infrastructure.
One of the main agricultural priorities in the medium group is the subsidised development of
the food industry which is aimed to increase productivity. The agricultural diversification and
investments which increase non-agricultural income, and rural infrastructural development should
be a priority.
3.
The undeveloped group is the largest among the three groups. Besides the lacking
infrastructure and service industry the unemployment rate is high (twice the national average).
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The non-agrarian, undeveloped group's interesting characteristic is that its demographic
statistics are favourable. The decrease in population is the lowest, despite the insignificant
immigration. High unemployment rate, ageing population and unskilled labour is also a
characteristic. The problems in this group are social rather than territorial (rural).
Therefore education, training and creation of jobs need to be a top priority. This is supported
by the fact that in these regions the productivity is significantly below, besides the national, the
rural average. The per capita (personal) income is also low.
The agrarian, undeveloped region's demographics are less favourable. Therefore a top
priority needs to be the stabilisation of the population and the stabilisation of the workforce. In the
agricultural sector the development of labour-intensive production and job creation should be
favoured. In addition to agricultural development, employment and income-generation outside the
agricultural sector should be encouraged.
Finally, let us introduce a further suggestion concerning the development of the large
(NUTS 2) regions. Rural development programs should be included in the large regions'
development plans. The ratio of sub-regions within the NUTS 2 regions also needs to be taken into
account. Our classifications also help in figuring out the above stated problems. Certain territorial
divisions can be seen on the map.
Rural development priorities in NUTS 2 regions
Our development priorities concerning the large (NUTS 2) regions are derived from the ratio
of sub-regions and their priorities. According to this method, the NUTS 2 regions’ priorities are
based on the smaller subdivisions, i.e. we have used a bottom-up approach.
Hungary can be divided into 7, NUTS 2 big regions. These are the following:

West-Transdanubia: Győr-Moson-Sopron, Vas and Zala County

Central Transdanubia: Fejér, Komárom-Esztergom and Veszprém County

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South-Transdanubia: Baranya, Somogy and Tolna County
Northern Hungary: Borsod-Abaúj-Zemplén, Heves and Nógrád County
Northern Plain: Hajdú-Bihar, Jász-Nagykun-Szolnok and Szabolcs-Szatmár Bereg County
Southern Plain: Bács-Kiskun, Békés and Csongrád County
Central Hungary: Budapest and Pest County
On the map, the NUTS 2 regions’ borders are indicated with red, the county borders are indicated with black lines. The seven NUTS 2
regions can be divided into four groups based on the prevalence of different types of sub-regions.
1. The West-Transdanubian region is relatively developed, but not highly urbanized.
Therefore, development priorities designed for developed rural regions should be applied.
The share of agriculture in the region’s economy is below average, however agricultural
activities are fairly productive and profitable. The rural sub-regions’ infrastructure is
developed; the unemployment rate is low. Among other characteristics, the cultural
traditions and natural surroundings are also favorable. These conditions are favorable for
rural tourism. As a result of its geographical position (its closeness to Austria and Western
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Europe, good infrastructure between these regions), this area is easily accessible for foreign
tourists. In respect of market as well as labor resources, this region is suitable for
environment-friendly agriculture. Certain areas are suitable to produce special goods (wine),
and for medicinal tourism. Beside these, this area (especially the Kisalföld) is favorable for
marketable agricultural production.
2. Central Hungary and Central Transdanubia are highly urbanized regions. These are
Hungary’s most densely populated regions. The share of agricultural employment is not
significant. The number of firms and companies is above the national average. The
unemployment rate is below average. Contrary to other regions, efficiency should be in the
focus of agricultural development. Resulting from the high number of urban population,
rural areas have important recreational purposes. Popular holiday spots (Balaton,
Dunakanyar etc.) and special arable land (wine-growing areas) can be found in this region,
where the preservation of the landscape and the reduction of pollution is a top priority.
Urban regions and the densely populated areas around the Lake Balaton create a good
market for bio-goods and environment friendly production.
3. Northern Hungary also has depressed industrial areas and agricultural regions with
insufficient productivity. The rural sub-regions are undeveloped, where the unemployment
rate is high. This last characteristic is also true for the urban areas. Development of labour
intensive production, creation of jobs and the agricultural diversification should have
priority in rural development programs. Relatively large part of this region is woodland
(forested above the national average), however the low quality agricultural land should be
further afforested. Developments based on the special, local conditions (wineries in Tokaj or
Eger) are also possibilities. Improvements in the infrastructure and investments aimed to
renew the villages would increase rural tourism.
4. Northern and Southern Plain, and the South Transdanubian regions are the most rural
regions in Hungary. At the same time, the two Plain regions’ economy is dominated by their
agriculture. Therefore, improvements in the agricultural production would play an important
role in the development of these regions. Especially advisable to improve the labor intensive
agricultural sectors, support the family owned businesses, and subsidize investments aimed
to develop the production and trade of agricultural products. Agricultural and rural
infrastructures also need to be expanded. In certain areas (Hortobágy, Tisza-tó), increase in
tourism, preservation of rural cultural heritage, and maintenance of the natural surroundings
should be realized.
The South Transdanubian region is somewhat different in its settlement patterns from
the Plain regions. Problems of the infrastructure, coming from the settlement pattern (large
number of small villages) should be solved. At the same time, the reduction of the
unemployment rate has to be decreased. The wine-growing areas and holiday spots provide
good conditions for developments in the rural tourism.
Special rural development measures and sources
The European Commission made it possible for new members that after the enlargement
they can put special rural development programs into practice. Instead of the usual 50 or 70%, the
EU finances 80% of the costs. Therefore, rural development priorities should include the following:
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






Early retirement for farmers
Support for less favoured areas or areas with environmental restrictions
Agri-environment programmes
Afforestation of agricultural land
Specific measures for semi-subsistence farms
Setting up of producer groups
Technical assistance
The question is whether or not all rural development programs in Hungary should include
these measures, and whether or not all these measures should be available for all of the regions.
Only the early retirement should be omitted from the national rural development plans.
Since the Guarantee Section of the EAGGF finances these measures, therefore they should be
introduced as horizontal measures. At the distribution of the subsidies, certain characteristics of the
regions should be taken into account. For example, the subsidies -available to so-called semisubsistence farms- should be concentrated to regions with large number of small family owned
businesses and high unemployment rate. The support of less favourable areas is only possible under
defined conditions.
Another question concerning rural development is the so-called modulation. Modulation
means that subsidies are not increased proportionally, but digressively, when above a certain size
and amount the subsidies cannot be increased. It is well known that the Agenda 2000 suggested the
obligatory application of this method. However, the final EU regulations made it optional for
member states, in such a way that they can use the remaining amount for rural development and
agricultural measures.
Today, modulation is used in the United Kingdom and in France. In our opinion, the use of
modulation should be considered in Hungary’s case, because the Hungarian agricultural structure is
rather dualist. It is true that the number of small farms is high, but it is also true that 1/3 of the total
agricultural land is cultivated by farms larger than 1000 ha. With a structure like this, modulation is
a favourable option and the remaining sources can be used for rural development projects. In
addition, modulation prevents the further expansion of huge farms, which is favourable in the
respect of rural development, because large farms drive the smaller farms out of business and
increase unemployment (bankrupt farmers, large farms use relatively fewer workers). Large farms
increase monocultural production, which leads to a decrease in biodiversity. However, these are not
desirable processes and results.
Choice of measures
In the following part we make some considerations on some eligible measures.
Prioritised support of purchasing, processing and service co-operatives
The establishment of purchasing, processing and service co-operatives is a basic need in
Hungarian agriculture. This is particularly true for vine growing enterprises, where the fragmented
land structure and the lack of assets are a basic hindrance to any type of development.
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In its annual support programmes of MARD some support has already been granted for the
establishment of these “new type” co-operatives. Moreover these co-operatives were offered
preferential support rates for machinery purchase. Nevertheless these incentives proved
insufficient, because hardly any new co-operatives have been set up since. The basic reason for this
is that the small individual farmers lack the necessary funds for the investments. In our view these
new type of co-operatives have to be supported in their starting phase to a far greater extent then
any other organisational form of farming. It is also important to overcome the generally bad attitude
of Hungarian farmers towards any collective arrangement.
Proposed measures:




For start up co-operatives preferential loans have to be made available. The rate of
preference has to exceed that of the conventional agricultural interest subsidy (which is
normally half of the prime rate).
Beside preferential interest rates state guarantee for certain long-term loans is also a
necessity. One typical problem of small scale farmers is that they can not provide the
required collateral for the banks, with which to secure the loan.
Investment projects into buildings or agricultural equipment, machinery should be
supported ex ante as opposed to the current practice of ex post refunding. This is
necessary because most growers lack the required funds for a viable investment project,
so they can not make use of the investment support schemes.
A comprehensive information campaign has to be launched with the aim of convincing
farmers about the advantages of the co-operative.
As they are primarily agricultural, all the above measures could be launched on the national
level as part of the annual agricultural support scheme. The administration and monitoring of the
running project should be delegated to the county offices of MARD, which has the appropriate
experience and expertise for that. The financial aspects of the scheme could managed by the state
treasury as usual.
Viticulture
With 91 thousand hectares of vineyards, viticulture is a significant sector in Hungarian
agriculture. In addition to the value of agricultural produce viticulture is also an important element
of the country-image and as such a major tourist attraction.
In general, natural endowments are rather favourable for wine production in Hungary. In the
most appreciated wine regions (Tokaj, Villány, Badacsony, Eger, Szekszárd etc.) wine production is
more and more oriented towards unique, internationally competitive wine production, which
generates the most local added value.
These 10-12 eminent historical wine regions consist of normally 15-25 villages, where wine
production is the most important (or single) source of income and employment. Thus viticulture is a
major or supplementary income source for at least 50.000 families, all of them located in rural
regions. The Badacsony wine region in the Tapolca sub-region is an eminent case in point.
One of the most important problems of the traditional viticulture in Hungary is wine faking,
which means illegal and highly artificial “wine” production, from water, sugar, wine lees and other
additives. This business flourishes in the eastern-central part of Hungary with a 200 –300 million
litre estimated annual output! Due to the presence of this huge faked wine volume on the Hungarian
market traditionally produced wine is impossible to sell at reasonable prices. This hits the lower
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quality wines in particular. It was the common view of the stakeholders, that Hungarian viticulture
can not be reconstructed unless wine faking is abolished completely. Since the mid-nineties several
steps have been taken by the government in order to fight wine faking (specialised wine commando)
without much result. Recently the inclusion of sugar into the excise product category was raised as a
means to fight wine faking. If the authorities do not demonstrate enough deterrence wine faking can
not be overcome. With the recent amendment of the excise regulation there seems to be a good
basis for the government to launch a comprehensive action.
A rather generous scheme has been operating in Hungary supporting the plantations of new
vine yards.
Besides voluntary farmers’ co-operatives major processing, bottling companies can also play
an active role in the integration of vine growers. This is particularly true for those wine regions,
where the land structure is extremely fragmented, with the majority of plots being less than 1 ha.
However it is important that these companies not only buy the vine but also offer pre-financing,
consulting in plant protection and machinery.
Proposed measures
 Land consolidation and plantation reconstruction have to be supported in parallel.
Support should be granted to the establishment of contiguous vine plantations between
2-15 hectares. The state has to bear the costs of land registration. The projects should be
examined by the sub-region’s administration, which would have to decide about the
viability of the project.
 Wine faking should be investigated and sanctioned more stringently than before. The
competent authority (Customs and Excise Agency) should be provided with the
necessary staff and mandate to act against this activity.
 Wine processing and bottling companies should get a quality vine subsidy from the state
if they pay the stipulated minimum price for the vine in their region. The qualitative
conditions (e.g. sugar content) for the supported vine have to be stipulated by the
county’s administration (farmer’s notary) and the wine municipality (hegyközség).
Supervision and monitoring can be performed by the county’s administration, whereas
financing by the state treasury.
Land, dwelling property rights, depopulation
The acquisition of agricultural land and dwellings by foreigners is a widespread
phenomenon in the Western part of Hungary. Since this land acquisition is mostly illegal its extent
is rather difficult to estimate. Recent publications put it at 20-30% of all agricultural land in the
counties located along the Austrian border (Zala, Vas, Győr-Moson-Sopron), whereas in the other
Transdanubian counties (Somogy, Tolna, Veszprém, Fejér, Komárom) this is somewhat lower. This
has been a high profile issue in Hungarian politics for several years and it is also subject to
negotiations in the context of EU accession. Besides foreign acquisition, a great deal of agricultural
land was obtained by non-local Hungarian investors, mainly for speculative purposes. Land
abandonment is also frequent.
From a rural development perspective it is quite clear, that large-scale acquisition of
agricultural land by non-local entrepreneurs is detrimental to the local community regardless of
whether the owner is foreigner or an urban resident.
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The prospect of emerging large (>500 ha) specialised commercial farms in the long term is
quite threatening, because this would exclude agriculture as a source of income and employment for
the local population.
So far the successive governments did little to create viable family farms, which would be
the single – and EU conform – vehicle to provide adequate income and employment for those
engaged in agriculture. The recent legislation of the Hungarian government is very much in favour
of the newly established family farms assisting them in land acquisition, land consolidation access
to credit etc.
Beside land acquisition, the buying up of houses is a serious problem too. Due to the
extreme difference between Hungarian and West European real estate prices (e.g. Hungarian prices
are 10-20% of the Austrian) the buying up of dwellings has started a few years ago. Most affected
are again the counties along the Austrian border and the minor Transdanubian villages with
beautiful rural landscape. The Tapolca sub-region is one of the most liked regions, where the
number of houses held by foreign owners reaches 30-50 % in some villages. This process is a
vicious circle, since this foreign demand increases the price level, making it unaffordable for those,
who would like to migrate there as permanent residents. Since the bulk of these new owners use
their houses only as a weekend house, depopulation is quite significant.
Proposed measure:
 Acquisition of agricultural land has to be made conditional on permanent residence and
agricultural qualification. The county’s agricultural offices together with the county’s
land registration office would be entitled to check whether an acquisition complies with
the above requirement.
 Land abandonment has to be penalised by registering mortgage on the abandoned land
plot.
 In the villages that belong to a national park (Balaton Uplands National Park, ŐrségVend Vidék National Park, Fertő Hanság-National Park) the national park should take
measures to regulate real-estate acquisition. The measures to be taken include:
 Acquisition of architectural heritage houses should be restricted to permanent residents.
The owners of these houses should get annual compensation for maintaining their house
in the original state.
 If the national park prescribes architectural requirements to the construction of new
houses a sufficient compensation should be paid to those, who comply with the
requirements.
 Municipalities should designate new parcels for dwelling construction in order to
provide opportunity to erect new houses for the local people. The state should contribute
to the administrative procedure required to update the settlements’ development plan.
This measure could be supported form the counties’ regional development fund being
conditional on the approval of the sub-region’s architectural office
 Local taxation should enable municipalities to differentiate between permanent and nonpermanent residents to a greater extent than now. To this end the Act on municipalities
should be amended.
Administrative reform
 The currently existing two parallel micro-regional networks (statistical sub-regions,
voluntary micro regions) have to be unified to create an all-inclusive, non-overlapping
system.
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

The administration of these sub-regions have to be strengthened, otherwise they will not
be able to handle the policies to be assigned to them in the future. Beside the rural
development manager and the sub-region’s chairman also farmers notaries, the building
authorities, secondary education and the social office should be organised on the subregional level.
Sub-regions should be represented in the counties’ bodies (county development council)
with more delegates than now. The delegates should not only be majors of settlements,
but also representatives of chambers, civil organisations.
Agro-tourism, organic farming
In Hungary, the expectations concerning organic food production and agro-, village-tourism
are excessive. Almost every rural sub-region having no potential for large-scale arable production
selected these two activities as a solution for their employment and income problems. By contrast
the demand for these activities is quite limited today, and we do not expect a major jump in the
future. Organic food demand account for only 1-2% of the total food demand, whereas rural tourism
generates only a fraction of the total tourist revenue of the country. Realistic chance for the
development of rural tourism is only given in such places, where the landscape is unique, other
attraction is also nearby (thermal bath, lake Balaton), closed to the Western borders.
Proposed measure:
Rural tourism should be supported only in those sub-regions, where the development
plan of the sub-region includes rural tourism. The official of the sub-region has to
approve the project bid. Support should be provided for the reconstruction of existing
buildings. On field training programmes has to be supported too.
b) Institutional setting
The present institutional framework of rural and regional development –
division of responsibilities
The Parliament
Naturally the parliament is the highest ruling body in rural- and regional development matters. The
parliament has a basic regulatory and allocation jurisdiction, most importantly the acceptance of the
National Regional Development Concept and the determination of support principles, resources and
eligible regions. In an indirect way the municipal support scheme also has an impact on rural- and
regional development. (e.g. No.30/1997 resolution of the parliament provides for the principles of
regional development aids and the classification criteria of beneficiary regions) In principle the
National Regional Development Concept gives the government the room to manoeuvre, since it lays
down the principles for programming, allocation, the designation of entrepreneurial sectors and
outstanding regions.
Central government
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It is obvious that the government holds the most important means in the central governance
of regional policy. The government decides about the decentralisation of financial resources, their
harmonisation, the development plans of outstanding regions and passes the most important decrees
of implementation.
The Ministry of Agriculture and Rural Development has an overall responsibility for
agriculture, food industry and rural development. It is also responsible for EU integration and the
co-operation between other ministries concerning these matters.
However the competence of the minister is rather loosely defined in the above respects, which
demonstrates that the “sectoral” treatment of rural development is quite vaguely defined within the
government both functionally and institutionally. Within the ministry there are a number of
different units dealing with these matters. There are also some overlapping responsibilities which
contribute to the tensions between these units.
The Unit for Rural Development Programmes (URDP) was set up in 1999. This unit was
formally commissioned to organise the writing of the SAPARD Programme, and they are also
involved in a range of other activities, as well as in the emergence of the system of voluntary microregions. Together with this unit a background research institution was created, within the Hungarian
Institute for Regional Development and Urbanism. This provides the essential expertise for
planning and analysis in rural development and also takes part in the practical implementation of the
programmes.
URDP is the sole unit in the governmental administration, which treats rural development in
an integrated way, aiming at decentralisation, the use of local resources and the development of
local partnerships. In this spirit they tried to incorporate as much rural development objective and
resources into National SAPARD Plan as possible, and tried to establish or reinforce these ideas in
practice, through the system of micro-regions. Besides the preparation of the SAPARD plan, this
unit is in charge of the Rural Development Fund (RUDF).
There are several different units for agriculture, food processing and marketing.
The Unit of Economy was the most involved in rural development matters, since it was
commissioned to co-ordinate the writing of the agricultural section of the SAPARD Programme.
The Unit for Agri-environment, the Unit for EU Integration, and the SAPARD Secretary also
have some responsibility, especially concerning the SAPARD Programme. Furthermore, within the
ministry there are four more units dealing with rural development matters. The first is the
Hungarian Regional Development Centre (HRDC), which is the secretariat for the National
Regional Development Council (see below). The three others are the Phare Offices for
Agriculture; for Regional Development; and for the Cross Border Co-operation (CBC)
programmes. These offices were set up for the management of different Phare programmes,
however, since they have acquired a lot of expertise in the field of EU administration over the years,
they make a significant contribution to the work on drawing up different type of plans and other
documents, required by the EU administration.
The traditional sections of MARD traditionally have a well-developed system of county
level offices, covering the entire country. These offices are manned by numerous permanent staff
and experts and carry out the implementation of agricultural policies.
The rural/regional division does not have such a system.
However, in connection with the SAPARD Programme, as an EU requirement, seven
regional offices were recently set up to implement the pre-accession programmes. These offices,
staffed by employees of MARD, work alongside the regional development agencies, already set up
before.
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The Ministry of Environmental Protection (MEP) is in charge of the overall strategy of
environmental policy and legislation. The MEP, co-operating with other ministries is responsible
for environmental issues and executes the governmental environmental policy through the activities
of various offices and regional organs. The current structure of the regional organs is a two-tier
institutional system. The governmental structure of environmental administration is divided
according to different environmental components. The Environmental Chief Inspectorate and the
subordinate twelve environmental inspectorates belong to MEP as its decentralised organisations.
The Chief Inspectorate is a state administrative organ on the national level. The environmental
inspectorates are organised according to water catchment areas, instead of the usual county or
regional setting. The nature conservation administration is a relatively separate organisational
structure, headed by the MEP. The system includes nine nature conservation and national park
directorates, organised according to natural areas.
Other ministerial departments also have significant responsibilities in rural development
matters. Possibly the most important is the Ministry of Economy, which has the overall
responsibility for strategic planning.
Development councils
As a consequence of the Act on Regional Policy and Physical Planning in 1996, a whole
system of regional development councils and offices was set up. This new institutional structure
is not politically elected, but a multiform body in which various local actors are involved. All the
councils at the different levels contain representatives of the political sector (ministries, local
governments), the economic sector (national or regional chambers), the employers and employees
side, and of the local authorities and their voluntary associations.
The system theoretically is a very advanced and democratic one; however, there have been a
lot of critiques about its work in practise. From a policy implementation aspect this institutional
framework is rather important, because the regional- and county councils allocate the decentralised
regional development funds.
The new institutional system on the different levels is the following:
National Regional Development Council
The task of the National Regional Development Council (NRDC) and the Hungarian
Regional Development Centre (which is practically the secretariat for NRDC) is to ensure coordination within the government. The NRDC is the national organisation for regional political
partnership, its composition reflects the logic applied on all territorial levels (it comprises
representatives of the government, municipalities, chambers and employers).
NRDC is primarily a consultative organisation. However, according to the EU’s country
study on Hungary, the co-ordination on the governmental level is the weakest point in regional
development, which is closely related to the unclear division of competence and responsibility in
this field.
Regional Development Councils
On the regional (NUTS 2) level 7 Regional Development Councils (RDC) and Regional
Development Agencies as the councils' offices were set up.
95
As for the regional development councils, it is to be noted, that the weakest point of the
entire Hungarian territorial system is the regional level. The 7 regions do not have traditions in
Hungary and their formation is advancing very slowly. There had been attempts to create a regional
level before the start of the accession negotiation; however, the most important reason for the
creation of the regions was the expected EU policies. This intended to be a voluntary, bottom-up
procedure, allowing the counties to form their alliances. However, in some regions the counties
could not reach an agreement in forming the regions, which held back the whole process. As a
consequence, regional councils and agencies, in some regions, did not work well or were not even
set up. After three years of fights, in 1999, the Act on Regional Development was modified and the
regions designated by law.
Before the amendment of the Act on Regional Development in 1999 these regional councils
did not have access to financial resources due to their uncertain status. The amended Act delegated
similar tasks and responsibilities to the regional councils to those of the already operating county
councils. The extension of responsibilities was coupled with a change in the councils’ composition.
After the exclusion of chambers’ representatives and inclusion of several additional ministerial
representatives the government’s control over the councils became almost complete.
On the one hand this can certainly be regarded as a centralising trend; on the other hand this
can also be explained as an initiative of the government to take part in regional policy actively. In
this spirit the government committed itself to co-finance the bureaucracy of the councils. In 2001
the third of the Regional Development Fund is allocated by the RDC’s, which is a signal of their
growing significance. However the allocation decisions of the RDS’s are made on the basis of an
expert committee’s proposal, from which the RDC’s can only deviate with qualified majority
voting. It is expected that this administrative level will be the main beneficiary of EU resources in
the pre-accession programmes.
County Development Councils
County Development Councils (CDCs) and agencies had a temporary advantage over
regional councils because the county level has long traditions in local policies and development in
Hungary. Therefore the county councils had a solid administrative basis and a developed network of
local connections to build on, which made them an indispensable institution for any type of
territorial policy. Since the changes of the'90s however this administrative level is continuously
losing its responsibilities, keeping only those tasks, which the local authorities were not able or
willing to do. Nevertheless, counties are still an important factor in rural development, as they are
involved in regional planning and decision making and dispose over a part of the decentralised
resources for regional development.
Although the central government has a weaker representation in the county councils than in
the regional councils it still has means to influence its decisions. If the representative of MARD
votes against the resolution of the council, then the minister can initiate a repeated discussion of the
subject. In case of a repeated failure of the minister’s representative in the voting it can appeal to the
NRDC.
Development Councils in outstanding regions
There are also some development councils and agencies, outside of this hierarchical system,
created to develop some areas, outstanding for some reason. There are six of them consist of the
councils: Budapest, the Lake Balaton, the area Lake Tisza, the Lake Velence, and the area of the
roads, number 6 and number 56.
96
Sub-regions and settlements
Below the county level there is a level of sub-regions, however, there are two sets of these.
One is designated by law and is called the 'statistical sub-regions', covering the whole area
of the country. This provides the framework not only for statistics, but also for every sort of
designation in the Hungarian regional development system. The “statistical sub-region” level
corresponds to the NUTS 4 level of the EU nomenclature, comprising normally 20-50 thousand
inhabitants. The country is made up of 150 sub-regions. This system of sub-regions is all-inclusive
and non-overlapping and does not transgress the county boundaries. (One county comprises
generally 5-10 sub-regions).
In most cases a sub-region consists of one major settlement (not necessarily urban) and the
surrounding villages, which are linked to the centre through their infrastructure, economy, healthcare,
education etc.
A sub-region is thus a community of geographically contiguous settlements tied together by
employment-, residential-, commuting-, medium level public service (education, trade, healthcare)
relationships. In this system each town is a local centre, however there are also local centres which are
not towns.
The current system of sub-regions has been applied by the Central Statistical Office since 1
August 1997.
Civil organisations
After the changes there was a boom of NGOs and different civil organisations. In 1998 there
were already more than 50 thousand of these all over the country, many of them connected to some
aspects of local development.
From a rural development perspective the most important ones are probably the voluntary
associations of villages18, mentioned above, together with their local development agencies. These
associations often have a significant influence locally, since some of them have the experience,
connection and expertise to access EU and domestic funds as well as to plan and carry out local
development projects and programmes. At the same time they are represented
in the regional and county development councils and have some influence on rural
development matters on a policy level. However, according to many critics, this representation is
very weak, which is one of the drawbacks of the whole system.
Another way to gain some political influence is through the Hungarian Rural Parliament.
This was established in 1998, as an umbrella organisation for NGOs working in sustainable rural
development. Today this association has 440 members, good connections with EU wide
organisations (e.g. with the ECOVAST), and started to gain some political influence in the
Hungarian arena for rural development.
There are more than 200 environmental NGOs working with rural development issues.
Although, environmentalism is not a mass movement (all NGOs together have approximately 10
18
Some of these are as old as ten years, with good institutional systems and connections in
and out of their region, and having many experiences in EU and domestic development
programmes. Others are much less successful or advanced and many of them came to existence only
last year, as a consequence of an initiative of MARD, to provide resources for micro-regions to
write their local development programmes in connection with the SAPARD Programme.
97
thousand members), it is quite influential in national and local politics These organisations vary in
size, resources and possibilities to a great extent. The congress of Hungarian environmental NGOs
is held once a year. It brings together all interested organisations and it chooses those 7 people, who
represent environmental NGOs on the National Environmental Council.
Representation of economic interests
The representation of agricultural producers is a complicated issue in Hungary. First of all,
the Chambers of Agriculture in Hungary is a statutory body, with compulsory membership;
therefore it cannot represent the economic interests of agricultural producers. Most of the largescale agriculture is represented by the National Federation of Agricultural Co-operators
(NFAC). They have a membership consisting of 1450 agricultural co-operatives (mainly the
successors of the 'old co-operatives') 30 other kind of co-operatives, 100 companies and a lot of
individual entrepreneurs, containing the largest agricultural integrators in Hungary. Their members
hold approximately half of the cultivated area, and, together with the vertically integrated
production, produce approximately 60-70% of the marketable agricultural products.
The representation of small producers is a much more difficult issue. It is very much
fragmented and not well organised. One of the reasons for this is that the one million small
producers are very fragmented geographically as well as along their interests and approaches. There
are a number of organisations, standing up for the rights of family farms and small enterprises. The
most influential one is the National Association of Hungarian Farmers' Societies and Cooperatives (NAHFSC). Practically speaking it is an umbrella organisation, having 830 local
farmers' unions as members, which represent 43 thousand farmers altogether. Some 50% of these
are part time farmers, and approximately 20 thousand are full time agricultural entrepreneurs,
representing one third of all of these in the whole of Hungary.
Beside the NAHFSC there is a range of other organisations claiming to be the interest
representatives of family farms of different types or from different areas. Members, aims, resources
and achievements of these organisations vary greatly, therefore significant tensions can be identified
and there is no institutionalised system for co-operation or for reaching consensus in important
questions between them.
Actual situation of the Hungarian implementation system of EAGGF
After the Hungarian accession, the support conditions will be different from the current
conditions in this structure and size, both in the agriculture and rural development.
To get the right for the paying out of EU sources of the community subsidisation, Hungary
needs a paying institution system accredited by the European Commission. This system is
often called EAGGF paying agency, referring to the funds of the subsidies. The paying
agency system includes all the tasks which are now, in the case of national support system,
the tasks of any institutions, departments, county offices of MARD (Ministry of Agriculture
and Rural Development) or the TFCO (Tax an Financial Control Office). By the
development of the Paying Agency, a new institution will be born which concentrates on the
tasks of the above mentioned institutions (especially the financial authorisation, the payment
and clearance of accounts functions) and co-ordinates those tasks which are delegable to
other bodies (authorisation, checks and controls).
98
Co-ordination of the development of agricultural administration system
In September of 2002 the Ministry created an administrative, state secretary supervised
body, the Project Office for EU Institutions. Its main task is the co-ordination of institutional
preparation during the pre-accession period. Its main goal is the development of the Paying Agency,
which is essential for the correct operation of European Agricultural Guidance and Guarantee Fund
(EAGGF), and the Integrated Administration and Control System (IACS). It is necessary the
segregation of co-ordination of development and the competent authority functions because,
respectively, the one means a project structure and management, the other suppose a continuous
responsibility in the taking of necessary institutional decisions. Meanwhile this decision making
body needs sufficient competency to take measures fast enough.
The appointment of MARD for the preparation to be the competent authority and the
development of the Project Office happened only in this year. Parallel to this, it has been shown
clearly that the EU-conform reorganisation of the whole agricultural administration system is
indispensable.
Main tasks of the EAGGF Paying Agency
The Paying Agency takes central place in two points of view in the EU agricultural
institution system:
1. First, the paying agency means the lowest level in the financial control of the agricultural
support system. The EU prescribes the main authority tasks to be segregated but the realisation
is depend on the national financial control system of the Member State.
2. Second, the paying agency is the only one responsible for the financial clearance of accounts
among the other bodies involved in the correct implementation of the EAGGF support system
and other EAGGF measures. By these important functions, it play a significant intermediate role
between the European Commission and the Member State, so it is the main implementing body
of the agricultural administration system in a Member State.
Groups of the implementation and payment tasks of the EAGGF paying agency:
 authorisation
 announcement of measures, approval of applications, concluding contracts, processing of
applications
 acceptance and processing of license applications,
 issuing licences or concluding contracts,
 handling of stocks (intervention),
 payment and clearance of accounts (not delegable!)
 payment
 paying out of subsidies,
 handling of levies,
 guarantee management,
 payments, clearance of accounts and registration of levies (debtors ledger),
 reporting:
 monthly clearance of accounts and forecasts for the advance money of the EU,
99

yearly reports about the payments, the warehouses, the irregularities, the debts lists
and the guarantees,
 reports about the realisation of measures in the case of programme financing,
 checks and controls
 physical control (ex-ante, simultaneous and ex-post, monitoring),
 external audit,
 internal audit of the institution itself, of the delegated tasks and of the subject of the
subsidies.
Delegated tasks and the tasks of the paying agency system
The EU-conform implementation system supposes that only one institution (the paying
agency) is responsible for the implementation of support schemes, however it can lay a charge on
other bodies to implement some delegable tasks. Despite of this, in Hungary, nowadays, a lot of
institutions and bodies are involved in the implementation system with different responsibilities.
Besides, these bodies have to meet different requirements depending on the concerning national
norms; e.g. it is a tax authority, a public institution or any body of the private sector.
The following table demonstrates the implementation bodies of the present agricultural
support system (according to the main tasks: authorisation, payment and control).
100
Bodies involved in the implementation of national schemes
Name
Authorisation
Payment and
accounting
Direct
payments
County Offices,
Checks and
controls
TFCO
NIAQC, Land Registry
TFCO,
MARD,
Offices, IGCRS
Internal
market measures
AIC, County
COG
Rural
AIC,
Offices, Rural
Development
TFCO, COG,
Development Councils
Council, TFCO
MARD
External
AIC, CFG, MET
TFCO
market
TFCO,
MARD, COG,
CFG
Intervention
AIC, County
Offices, AMRO, Public
AIC, TFCO,
Public warehouses
TFCO,
MARD, COG
warehouses
Investments
County Offices,
and rural
Regional Rural
development
Development Offices,
subsidies
SAPARD Offices
HST, TFCO,
SAPARD Offices
TFCO,
MARD, COG,
SAPARD Offices
Abbreviations see at last page.
101
The main problem is not the fact that the authorisation process is shared among so much
institutions because these tasks, together with control tasks, are delegable functions. These
institutions have to meet uniform requirements in order to be able to relate to the paying agency
about the correct implementation of their work. However, concerning the physical controls, today
neither the methods of MARD and its county offices, nor the processes of TFCO and its county
directorates meet the EU requirements in these aspects.
The most significant problem is that the payment function is divided among so many
institutions and only the AIC and the SAPARD Office are supervised by the MARD. After the
accession, only one institution will be authorised to play such a responsible role. The EAGGF
Guarantee Fund Paying Agency has important agricultural administration tasks, so that, it has to be
developed under the control of MARD.
The future paying agency has two important roles, the one is, it has to implement the basic
functions, the other is, it has to co-ordinate effectively the other agricultural implementing bodies. It
can delegate the authorisation and control tasks to other bodies. There are several proposals to the
list of bodies involved in the implementation of delegated tasks. The Government approved the
following institutions by the 2285/2002 (IX. 30.) Government Regulation:






county offices
National Institute for Agricultural Quality Control
Institute for Geodesy, Cartography and Remote Sensing
Research and Information Institute for Agricultural Economics
Hungarian Agricultural Chamber
Hungarian State Treasury
The presentation (transmission) of implementation tasks of the concrete schemes has not
decided yet, so that, the co-operation in order to create the implementation process between the
paying agency’s centre and the regional institutions could not start.
IACS
In case of direct subsidy schemes, each step of the implementation (authorisation, payment
and control) is based on a compulsory system, called Integrated Administration and Control System
(IACS). This system consists of the following main data-bases:
 Land Parcel Identification System,
 System for Identification and Registration of Animals,
 Registration System for Farmers,
 Aid Application Management System.
The connection between the above mentioned registrations is based on the integrated control
system which collects and cross-checks the basic data for the administrative controls,
besides, it means a solid base for the registration of physical controls.
This complex system is not maintainable by only one Ministry supervised institution, in
particular if the AIC is only asked for the preparation tasks and officially not appointed yet
to the paying agency role. It is necessary to emphasise the central role of MARD, future
competent authority, in the development of IACS because, despite of that it is used only for
the direct payments (one among the five measures), it is the biggest budgetary item of the
102
accession preparation, and it needs the harmonisation of the existing or developing databases of the different bodies.
Concerning the development of these data-bases, Hungary can produce partial results but
because of the lack of co-ordination these results, in regard to the pressure of time, are quite
small
Abbreviations
Tax and Financial Control Office – TFCO
Agricultural Intervention Centre– AIC
Agricultural Market Regime Office – AMRO (MARD)
European Agricultural Guidance and Guarantee Fund – EAGGF
County Offices – regional offices of MARD
Institute for Geodesy, Cartography and Remote Sensing - IGCRS
Ministry of Agriculture and Rural Development - MARD
Control Office of Government - COG
Common Agricultural Policy - CAP
National Institute for Agricultural Quality Control – NIAQC
Customs and Finance Guard – CFG
6.
LITERATURE
1.
S. HTTP-ADRESSES IN TEXT
2.
BAUER, Kai (2002): Documentation of the Idara Agricultural Sector Simulation Model for CEE Countries (i-sim).
Unveröffentlichtes idara working paper 1/3. Verfügbar www.agp.uni-bonn.de/agpo/rsrch/idara/idara_e.htm. Stand 27.7.02.
3.
FAPRI (2002): World Agricultural Outlook 2002, Staff Report 1-02, Ames. Verfügbar www.fapri.org.
4.
FAOSTAT (2002): Agricultural Database, Rom. Verfügbar www.fao.org, Stand 27.7.02.
5.
OECD (2002): Agricultural Outlook 1998-2006, Paris
6.
WITZKE, H.P. / VERHOOG, D. / ZINTL, A. (2001): Agricultural Sector Modelling: A New Medium-term Forecasting and
Simulation System (MFSS99). Eurostat, Luxemburg
7.
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105
IDARA plus
QA for agricultural sector models
Keywords: Quality management, Lowering autocracy, Complex Check lists
Dr. László Pitlik, University of Gödöllő
http://miau.gau.hu/miau/48
INPUTS
OUTPUTS
EAA plus 1998 (Fact)
Expectations (Normative)
Political variables (Normative)
EAA plus 2006 (Estimation)
Model
Trends (Normative)
Check list (Estimation)
Reports with balances
Visualisation Effects
Elasticities (Normative)
Important Aspects:
Important Aspects:
Statistical values have never been consistent itself,
therefore they have to be modified / completed on the
basis of assumptions. We may talk about FACT
values only after these restrictions. These
modifications may lead to sensible exogenous
variables (e.g.: fallow land, grass land).
The Output EAA should be the same detailed as
the Input EAA.
All the other inputs are assumptions from experts.
For the yield trends AI based similarity analyses have
to be used to assure authenticity of the estimations
(Complex evaluation criteria are not given for the
World market prices).
Elasticities can not be easily (algorithmically) defined,
but fortunately they don`t cause too much sensitivity
for the model.
For satisfying the expectations (input side) the
check list values visualising (“green wave”).
In the case of an unfulfilled expectation/restriction
have to go through an iterative way (through
changing a known /sensitive/ assumption).
The report about the outputs should never be
partial. It should better balance based, for proving
the authenticity of the results for all the times.
Without check listed expectations, without
objective functions where assumptions are
predefined, all the results are arbitrary.
REMARKS:
FACT = (quasi) the consistent reality, on the base of statistical data (after ABTA – rules)
Estimation = Forecasts, endogenous values (algorithmical defined for all the cases)
Normative = Hypothesis, Assumptions for exogenous variables (with different impacts for the model sensitivity)
ABTA = Balances for products and monetary stream/flow (additional: Biological coefficients for animal breeding)
AI = Artificial Intelligence (for assuring the authenticity of the intuitive assumptions)
EAA106
plus = Activity-, regional, technology-, legal form based EAA
Appendix: Check list for iterative modelling
107
Appendix 1: Population and settlements in Hungarian subregions
Index, 19.1
I. developed
II. middle developed,
non-agricultural
III. middle-developed,
agricultural
IV. under-developed,
non-agricultural
V. under-developed,
agricultural
Country total
Rural total
12
20
9
21
30
150
92
Number of sub-regions
Avg.
Std. Var.
Avg.
Std. Var.
Avg.
Std. Var.
Avg.
Std. Var.
Avg.
Std. Var.
Avg.
Std. Var.
Avg.
Std. Var.
Number of settlements
20
14
20
11
20
13
21
11
19
13
21
14
20
12
Number of towns
1,3
0,8
1,3
0,9
1,6
1,1
1,4
0,8
1,3
0,6
1,5
0,9
1,4
0,8
– 499
7,6
12,1
7,0
9,4
7,0
9,0
6,9
7,9
7,7
10,7
6,9
10,0
7,3
9,7
500-999
4,2
3,8
4,5
3,7
4,8
5,0
5,1
3,4
4,3
4,5
4,6
4,6
4,6
4,0
1000-1999
3,8
3,0
3,7
2,6
3,7
2,6
4,5
2,5
3,6
2,9
4,4
3,2
3,8
2,7
2000-4999
3,0
2,9
3,4
2,8
2,8
2,2
2,8
2,8
2,3
1,8
3,1
2,8
2,8
2,4
5000-9999
0,8
0,9
0,7
1,4
0,8
1,1
0,6
0,7
0,9
0,9
0,9
1,3
0,8
1,0
10000-49999
0,6
0,5
0,9
0,9
0,7
0,5
0,8
0,9
0,4
0,6
0,8
0,8
0,6
0,7
50000-99999
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,1
0,3
0,0
0,0
100000Area size km2
Resident population
Change in population
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,0
0,1
0,2
0,0
0,0
606,9
209,3
610,9
298,8
706,9
290,6
609,6
241,7
618,4
274,2
620,2
309,9
621,9
262,6
43576,0
20207,4
41600,0
27236,2
34994,4
18128,1
38187,3
16684,3
29540,4
14020,3
66954,8
151021,2
36500,1
19650,0
-2,6
3,4
-2,5
3,1
-2,7
4,2
-1,8
2,1
-2,6
2,6
-1,6
4,3
-2,4
2,9
23133,4
14871,6
18761,5
18863,3
16329,8
10780,8
16893,0
15863,9
11632,3
8040,9
42613,4
150215,6
16342,6
14209,6
3925,9
4178,4
2751,3
2212,3
2406,8
1482,8
3131,5
4378,2
2259,8
1693,7
15574,2
147661,5
2797,3
2959,3
Population density
(person/km2)
70,6
17,0
64,9
14,8
48,0
16,6
63,2
16,1
47,8
9,3
115,7
284,4
58,0
16,5
The rate of inhabitants in
settlements with more than 120
population density
32,6
18,7
21,4
19,8
20,0
19,0
24,6
18,5
10,0
13,7
39,7
30,2
19,7
18,7
8,6
1,0
9,6
1,4
9,7
1,1
11,0
1,6
10,6
1,7
9,9
1,5
10,1
1,7
Population of towns
Average population of towns
Live births
Deaths
13,0
1,5
14,6
1,9
15,3
2,2
14,9
1,8
14,8
1,7
13,9
1,9
14,6
1,9
Net migration
6,6
14,8
3,7
5,5
3,7
6,7
0,7
4,3
-0,8
3,7
2,5
7,5
2,0
7,2
Average net migration per 1000
inhabitants a year
0,6
5,3
-0,4
3,3
-0,4
3,4
-2,6
2,6
-3,4
2,9
-0,1
5,4
-1,7
3,6
The rate of people aged more
than 60 years per population %
20,6
2,1
20,9
2,1
21,2
2,6
20,5
2,2
20,5
2,2
20,0
2,1
20,7
2,2
108
Appendix 2: Active earners and unemployed people in the Hungarian subregions
Index, 19.2
Number of sub-regions
12
Avg.
Agriculture and forestry active earners
as % of all active
Industry and construction active earners
as % of all active
Services active earners as % of all
active
Unemployment rate % 2000
Long-term (over 180 days) unemployed
rate 1996
Long-term (over 180 days) unemployed
rate 2000
Long-term (over 180 days) unemployed
rate as % of total unemployment 1996
Long-term (over 180 days) unemployed
rate as % of total unemployment 2000
Share of non-manual workers in
unemployment 1996
Share of non-manual workers in
unemployment 2000
Bed places of old people's club 1000,
per people aged over 60 years
Infants enrolled per 100 infant nursery
places
Unemployed percons received income
supplement
Other cases of support by local
government
Number of persons with public medical
care card
Inhabitants per GPs and Pediatricians
Consulting hours in outpatient services
(1000)
Hospital beds in use per 10000
inhabitants
Number of tax payers per 1000
inhabitants
Gross income serving as basis of
personal tax
Personal income tax
II. middle developed, nonagricultural
I. developed
III. middle-developed,
agricultural
20
Std. Var.
Avg.
IV. under-developed, nonagricultural
9
Std. Var.
Avg.
V. under-developed,
agricultural
21
Std. Var.
Avg.
Country total
30
Std. Var.
Avg.
Rural total
150
Std. Var.
Avg.
92
Std. Var.
Avg.
Std. Var.
24
4
23
4
38
7
24
3
36
6
23
11
29
8
35
8
38
6
28
3
38
5
28
5
37
9
33
7
41
7
39
5
34
6
38
5
36
4
40
8
37
5
5,3
1,8
5,6
2,4
6,5
1,5
10,5
3,4
11,5
3,6
7,3
3,9
8,7
4,0
3,7
1,2
4,0
1,1
4,4
1,2
7,2
1,7
7,9
2,4
5,1
2,5
6,0
2,5
2,4
1,1
2,7
1,4
3,3
1,0
5,8
2,4
6,1
2,4
3,7
2,4
4,5
2,5
51,3
7,6
51,7
5,5
53,2
5,5
59,0
5,5
59,4
7,2
54,8
7,6
56,0
7,3
44,9
7,7
47,3
4,6
50,9
6,5
54,1
7,8
51,7
6,8
48,7
7,6
50,3
7,3
15,9
2,5
13,6
3,1
14,2
3,1
10,7
2,4
10,6
2,4
14,7
5,2
12,3
3,3
16,9
3,0
15,0
2,8
13,1
2,7
10,7
2,2
10,6
2,6
15,5
5,7
12,7
3,5
18
7
27
15
17
7
27
14
37
27
24
17
28
19
120
46
83
58
92
70
89
61
89
69
103
53
92
62
8,3
4,4
10,3
7,1
12,7
6,1
26,6
11,4
27,9
13,9
15,5
12,6
19,7
13,5
356
254
315
166
2661
6776
351
137
488
443
510
1682
614
2140
41
13
50
12
57
12
61
14
68
18
52
17
58
17
1472
151
1531
150
1505
207
1618
163
1503
165
1533
158
1531
168
45,1
30,8
38,7
33,9
33,4
20,3
32,9
21,1
22,2
17,7
105,3
429,5
32,3
25,5
49
62
47
43
35
40
60
70
14
34
54
57
38
53
446
28
399
40
386
30
381
213
346
38
401
96
383
109
326662
45677
281146
43864
241734
43344
247323
75968
204961
33142
291711
84917
250664
64050
69459
13881
56495
11975
46067
9943
40685
8198
35960
7542
60102
25583
46861
15186
109
Appendix 3: Public utilities in the Hungarian subregions
Index, 19.3
I. developed
II. middle developed,
non-agricultural
III. middle-developed,
agricultural
IV. under-developed,
non-agricultural
V. under-developed,
agricultural
Country total
Rural total
12
20
9
21
30
150
92
Number of sub-regions
Avg.
Std. Var.
Avg.
Std. Var.
Avg.
Std. Var.
Avg.
Std. Var.
Avg.
Std. Var.
Avg.
Dwelling stock, 1st Jan., 2001
17726,7
8286,5
16856,9
11243,7
14629,3
7774,9
14813,9
6339,6
12004,4
5851,4
27075,2
Inhabitants per 100 dwellings
Std. Var.
Avg.
Std. Var.
68055,3
14703,8
8023,9
246,3
16,0
249,0
18,1
238,9
18,9
258,0
13,5
247,8
21,8
253,2
19,2
249,3
18,8
Dwellings built
98,5
72,4
72,2
84,7
59,8
40,0
67,3
44,6
50,7
43,0
143,9
285,6
66,3
59,4
of which with 4 and more rooms (%)
36,4
10,7
33,2
13,7
26,2
9,1
21,7
13,6
26,5
20,5
30,9
15,2
28,1
16,1
Dwellings built per 1000 inhabitants
Average floor place (sq. m)
Ceised dwellings per 100 dwellings built
Dwellings built in 1990-2000 as % per dwelling stock
Households consuming piped gas as % of dwelling
stock
Annual piped gas consumption per household consumer
(cu. m)
Electricity consumption per household consumer (kWh)
Dwellings connected to public water conduit network %
of dwellings
Dwellings connected to public sewerage conduit
network % of dwellings
Length of public sewerage per 1 km of water conduit
network (m)
Annual water consumption per inhabitant (cu. m)
2,6
1,5
1,5
0,8
2,0
1,2
1,7
0,7
1,6
0,9
2,1
1,4
1,8
1,0
107,7
18,8
103,5
15,2
91,2
12,1
88,5
9,6
93,2
17,4
97,6
16,3
96,0
16,4
31,0
42,2
45,1
36,8
36,8
39,0
48,6
28,8
100,8
147,3
47,5
76,9
61,4
92,3
8,4
3,6
7,1
2,1
7,2
1,7
7,6
2,1
7,4
2,6
7,8
2,9
7,5
2,5
64,8
24,0
51,3
19,3
51,8
21,9
55,2
11,7
45,6
19,9
57,0
20,7
52,2
19,6
1355,8
255,8
1430,8
240,9
1299,4
225,9
1426,1
255,9
1274,4
318,8
1380,7
312,8
1356,1
276,0
2128,7
623,0
2281,8
453,2
2277,5
327,3
2168,6
194,1
2259,6
292,5
2192,7
372,0
2228,3
371,6
94,6
4,5
90,0
7,6
86,2
7,8
85,2
8,7
85,8
10,7
89,6
9,1
87,8
9,1
40,5
15,3
25,9
12,3
21,7
13,3
19,4
9,1
13,8
7,5
33,6
21,5
22,0
13,5
393,3
215,9
257,9
173,8
257,9
238,6
221,3
124,3
174,4
120,2
326,1
216,9
240,0
172,2
36,1
6,9
30,9
5,7
31,2
7,0
24,2
4,3
27,2
5,0
31,2
8,0
28,9
6,6
Children enrolled in kindergartens per 100 places
95,4
7,1
92,7
9,8
92,1
10,4
99,9
8,7
98,3
9,9
98,0
9,8
96,5
9,6
Primary schools
17,8
7,7
19,1
7,2
16,0
8,2
19,4
7,1
15,0
7,9
24,6
34,6
17,4
7,7
Primary school pupils per class
20,6
1,8
19,1
2,7
19,6
2,8
20,0
1,8
19,7
2,0
20,4
2,2
19,8
2,2
3,3
1,8
3,2
2,6
2,4
1,7
2,8
2,7
1,9
1,3
7,0
22,1
2,6
2,1
Secondary schools
Secondary school students per 1000 inhabitants
24,4
10,1
21,9
13,5
14,7
7,3
20,5
13,3
19,1
10,7
27,5
16,6
20,3
11,7
Full time students of higher education institutions per
1000 inhabitants
2,8
4,7
1,2
3,6
0,0
0,0
0,9
3,0
1,6
6,2
5,3
12,4
1,4
4,5
Average number of school grades
8,7
0,2
8,4
0,2
8,1
0,2
8,1
0,2
8,0
0,2
8,5
0,5
8,2
0,3
110
Appendix 4: enterprises in the Hungarian subregions
Index, 19.4
Number of sub-regions
Corporations and unincorporated enterprises total
Corporations and unincorporated enterprises / sq. km
Corporations and unincorporated enterprises per 1000
inhabitants
Companies and partnerships
Companies and partnerships of which employing 0 and
unknown
II. middle
developed, nonagricultural
20
I. developed
12
III. middledeveloped,
agricultural
9
IV. underdeveloped, nonagricultural
21
V. under-developed,
agricultural
Country total
Rural total
30
150
92
Avg.
3244,9
Std. Var.
1944,1
Avg.
6448,4
Std. Var.
9593,6
Avg.
2393,3
Std. Var.
1090,3
Avg.
2060,2
Std. Var.
1314,5
Avg.
1977,7
Std. Var.
3298,8
Avg.
6128,9
Std. Var.
20724,0
Avg.
3174,4
Std. Var.
5177,0
5,5
1,9
5,6
5,1
3,3
1,3
3,1
1,2
2,3
1,0
10,0
39,0
3,7
2,9
72,2
15,9
66,0
16,8
61,6
8,7
47,9
9,7
47,2
8,7
64,6
21,3
56,1
15,5
1016,6
695,5
2168,8
3423,8
713,1
410,7
569,3
405,4
552,0
1080,3
2562,2
12040,8
983,8
1829,2
363,8
246,6
801,5
1263,1
236,9
137,3
208,7
155,6
182,1
369,1
1087,3
5906,6
351,9
671,4
538,2
392,5
1154,2
1840,4
382,7
232,3
291,6
212,6
297,6
589,8
1273,7
5470,8
522,1
984,9
Companies and partnerships of which employing 10-19
52,3
33,8
97,9
152,0
41,9
24,6
28,7
17,9
29,8
52,2
97,7
355,6
48,4
81,9
Companies and partnerships of which employing 20-49
37,3
24,7
63,7
96,6
29,2
16,1
23,0
15,2
23,2
40,2
60,4
194,8
34,4
53,6
Companies and partnerships of which employing 50-249
Companies and partnerships of which employing 250 and
more
Companies and partnerships in the field of agriculture,
forestry and fishing
Companies and partnerships in the field of industry and
construction
21,0
13,2
42,5
61,3
19,7
9,7
15,1
11,7
16,6
23,4
35,0
100,9
22,8
33,6
4,1
3,7
9,2
16,2
2,8
2,2
2,3
2,8
2,6
7,6
8,2
27,5
4,2
9,2
72,8
35,4
126,3
159,5
70,9
36,7
67,5
23,7
75,6
69,1
92,9
106,8
83,9
88,0
218,3
146,0
444,8
654,4
185,2
117,6
140,8
87,8
119,0
206,0
518,0
2092,6
214,2
352,7
265,2
171,4
592,3
909,7
207,9
139,7
158,8
121,4
154,4
298,2
706,5
3231,3
270,3
490,0
77,0
60,5
122,5
208,1
31,1
18,0
23,3
19,0
28,4
69,5
103,7
380,3
54,3
112,8
251,2
229,2
593,1
1076,9
117,1
63,6
101,4
123,4
103,4
295,4
799,7
4705,9
230,0
565,2
2228,3
1779,0
435,7
1277,4
1024,8
257,5
4279,6
3471,4
787,4
6180,1
5059,3
1098,4
1680,2
1321,9
347,2
688,1
506,8
179,9
1490,9
1164,6
317,0
923,5
726,2
202,6
1425,7
1118,9
299,2
2224,0
1860,4
359,7
3566,7
2957,5
593,7
8810,6
7811,3
1008,2
2190,6
1746,7
431,9
3356,8
2755,5
591,9
156,0
80,3
278,2
373,1
195,4
117,0
140,4
75,4
186,9
169,9
198,4
202,2
192,9
209,6
Companies and partnerships of which employing 1-9
Companies and partnerships in the field of trade, repair
Companies and partnerships in the field of hotels and
catering
Companies and partnerships in the field of real and business
activities
Sole proprietors
Sole proprietors of which employing 0 and unknown
Sole proprietors of which employing 1-9
Sole proprietors in the field of agriculture, forestry and
fishing
Sole proprietors in the field of industry, construction
409,5
237,5
824,0
1171,9
337,0
126,5
276,1
182,7
244,1
423,3
620,8
1294,7
408,1
640,9
Sole proprietors in the field of trade, repair
518,1
294,4
1006,6
1348,8
440,1
207,8
398,7
233,5
375,6
512,6
810,4
1581,5
542,9
743,1
Sole proprietors in the field of real and business activites
439,5
310,2
940,8
1485,4
254,2
107,8
239,7
168,1
225,6
458,5
893,7
3277,7
415,0
793,0
111
Appendix 5: Trade, tourism and services in the Hungarian subregions
Index, 19.5
I. developed
II. middle
developed, nonagricultural
III. middledeveloped,
agricultural
IV. underdeveloped, nonagricultural
V. underdeveloped,
agricultural
Country total
Rural total
12
20
9
21
30
150
92
Number of sub-regions
Avg.
Std. Var.
Avg.
Std. Var.
Avg.
Std. Var.
Avg.
Std. Var.
Avg.
Std. Var.
Avg.
Std. Var.
Avg.
Std. Var.
Retail trade units total
785,5
306,8
609,4
439,5
570,8
341,2
532,1
238,6
439,8
218,5
1058,8
2404,1
555,7
319,1
Shops and department stores with food dominance
194,3
70,3
166,3
96,9
142,6
69,5
155,8
65,0
132,3
66,7
247,7
426,3
154,1
75,8
Retail trade units of which clothing products
109,4
56,7
65,3
55,7
64,1
43,8
53,8
32,1
39,3
26,1
142,2
410,2
59,8
46,2
Retail trade units of which hardware, paint and
glasswares
53,0
28,2
41,0
31,9
36,8
24,7
28,9
16,1
22,6
12,7
65,3
137,7
33,4
24,0
Retail trade units of which electrical appliances
19,9
9,2
14,9
13,8
15,3
10,6
10,3
6,7
8,8
6,3
33,7
103,8
12,6
9,8
Retail trade units of which motor vehicle parts and
accessories
16,7
8,6
14,1
12,1
17,1
18,7
14,2
9,1
10,6
6,5
30,3
73,0
13,6
10,4
Retail trade units of which furniture, household articles
19,3
9,9
14,0
13,8
12,6
10,5
9,6
6,5
7,1
5,0
26,9
71,1
11,3
9,7
9,2
4,3
9,0
6,6
7,2
4,4
7,2
3,6
5,9
3,7
13,2
29,3
7,4
4,7
Retail trade units of which pharmacies
Retail trade units per 1000 inhabitants
19,4
6,4
14,4
2,9
15,6
2,4
14,0
2,0
14,9
2,8
15,8
4,3
15,2
3,7
Catering units total
319,8
167,6
195,4
123,5
160,3
88,2
176,3
86,5
142,6
77,8
333,0
635,5
186,6
118,0
Catering units of which restaurants, confectioneries
242,1
152,0
125,5
83,3
104,0
57,4
105,3
58,4
84,2
51,5
228,1
479,8
120,5
92,7
Catering units of which bars, taverns
Public accomodation establishments bed places
Public accomodation establishments bed places per 1000
inhabitants
Public accomodation establishments tourist nights
67,1
30,5
59,9
36,9
51,0
30,6
60,5
26,9
51,8
30,1
79,7
84,2
57,5
30,9
3328,3
3248,7
726,1
805,5
440,2
335,5
623,7
594,6
579,4
927,9
2084,8
4747,3
966,3
1620,3
115,1
131,0
22,1
23,1
21,0
31,1
16,1
12,0
19,0
24,6
42,2
105,9
31,7
59,6
7153,0
9899,9
1010,6
1547,1
774,7
1197,9
534,1
483,9
429,9
475,0
2155,1
6494,9
1490,6
4184,2
Passanger cars per 1000 inhabitants
237,5
29,2
204,1
23,6
233,3
25,4
164,8
24,4
172,9
28,1
210,1
44,6
192,2
37,7
Telephone main lins per 1000 inhabitants
350,8
53,2
305,7
23,6
303,8
30,3
267,3
29,5
258,5
25,8
306,3
54,3
287,2
44,0
Number of homes connected to cable television network
per 1000 inhabitants
137,3
70,2
110,4
64,6
104,2
76,3
77,3
60,3
65,2
48,1
128,0
91,5
91,0
64,5
112
Appendix 6: Agriculture in the Hungarian subregions
Index, 19.6
I. developed
II. middle
developed, nonagricultural
III. middledeveloped,
agricultural
IV. underdeveloped, nonagricultural
V. under-developed,
agricultural
Country total
Rural total
12
20
9
21
30
150
92
Number of sub-regions
Avg.
Number of private farms (1994)
Number of private farms (2000)
9556,3
Std. Var.
4487,9
Avg.
11274,1
Std. Var.
7765,9
Avg.
10457,1
Std. Var.
5187,4
Avg.
10520,1
Std. Var.
4211,4
Avg.
9271,4
Std. Var.
4517,6
Avg.
11163,6
Std. Var.
7025,2
Avg.
10145,0
Std. Var.
5330,5
5468,9
2803,0
6341,5
4397,4
7069,7
4056,6
6239,9
2703,7
6000,4
2619,0
6390,2
4457,5
6164,5
3223,1
Number of persons belonging to private farms (1994)
26717,8
11710,3
31039,7
20442,7
28221,4
13597,4
29793,0
12046,2
25642,4
12222,5
31729,2
20102,2
28155,7
14296,4
Number of persons belonging to private farms (2000)
15022,5
7035,3
17198,7
11003,0
18744,6
9967,8
17403,3
7805,7
16399,8
7208,3
17655,9
12163,2
16852,3
8420,5
594,4
467,8
780,2
592,4
1031,7
949,1
794,1
380,2
975,1
576,1
822,1
702,7
847,3
579,0
Land use of private farms total (ha) (1994)
9710,3
6071,7
9699,6
5939,7
11929,1
7204,0
9395,1
5155,1
12043,6
6588,5
9998,0
7293,8
10613,9
6126,8
Land use of private farms total (ha) (2000)
17773,5
9810,7
18913,6
13532,3
25387,9
15196,7
18473,1
9176,7
21010,7
10568,6
19783,2
13961,7
19981,6
11354,9
Land use of private farms of which: arable land (2000)
11687,9
9379,8
12030,7
8855,5
12409,0
7424,1
12263,0
8310,3
14455,6
9329,6
12418,3
10149,2
12866,8
8720,3
685,8
1313,0
247,3
260,5
1672,0
4172,0
234,3
433,7
178,3
255,1
396,0
1161,6
418,4
1418,8
Private farms, cattle stock (1994)
1722,7
1258,4
2054,3
1545,3
1732,8
518,4
1625,7
1126,3
2180,5
1999,4
1733,7
1537,2
1922,9
1523,6
Private farms, cattle stock (2000)
1803,0
1584,6
2259,3
1910,7
1906,4
847,3
1753,3
1404,5
2042,5
1863,9
1824,4
1683,0
1979,1
1644,5
Private farms, pig stock (1994)
18837,2
16056,1
20899,8
14553,9
22353,1
11503,6
16175,5
11432,8
20297,8
13433,3
18739,8
15005,3
19498,3
13315,8
Private farms, pig stock (2000)
16841,8
18039,3
19800,7
16326,3
19222,4
10133,8
15237,8
13416,2
19267,7
14175,4
16788,6
15677,2
18142,9
14523,1
Number of persons belonging to private farms of which:
full-time managers of private farms (2000)
Land use of private farms of which: vineyards ha (2000)
Number of agricultural enterprises (2000)
Land use of agricultural enterprises total area ha (2000)
Land use of agricultural enterprises of which: arable land
(2000)
Land use of agricultural enterprises of which: orchards ha
(2000)
Land use of agricultural enterprises of which: vineyards
ha (2000)
Agriculture enterprises, cattle stock (2000)
Agriculture enterprises, pig stock (2000)
56,5
18,1
46,1
28,7
46,8
30,4
44,7
18,1
46,3
22,1
55,9
42,6
47,3
23,1
19098,4
10414,5
22074,7
20058,1
19251,2
20456,3
20128,3
18923,0
17825,4
13126,7
25558,8
26595,1
19580,3
16431,8
15263,6
9581,2
15414,6
10898,7
15034,9
17980,9
11845,1
9731,7
12501,2
9585,2
13344,4
10796,6
13592,9
10808,1
64,8
108,0
145,4
342,3
129,3
108,3
111,9
141,3
83,4
139,2
139,4
245,6
105,4
195,6
67,1
96,5
36,6
80,0
95,0
127,1
24,3
59,6
26,1
67,4
58,3
124,7
40,0
81,4
5368,4
4094,7
4431,5
4361,5
3122,9
3834,6
3169,0
3757,4
3715,5
3097,1
3845,2
3811,7
3904,1
3740,5
21307,8
18725,1
17800,3
23336,1
15824,6
28707,7
10499,8
14561,2
19053,9
23698,6
16824,1
23887,7
16806,9
21632,0
113
Appendix 7: Non-agricultural activities in the Hungarian subregions
Index, non-agricultural activities
I. developed
II. middle
developed, nonagricultural
III. middledeveloped,
agricultural
IV. underdeveloped, nonagricultural
V. underdeveloped,
agricultural
Country total
Rural total
12
20
9
21
30
150
92
Number of sub-regions
Avg.
Std. Var.
Avg.
Full-time private farms per 10 sq. km (pcs/sq. km)
9,1
4,9
11,9
5,0
13,7
8,8
13,4
5,7
16,2
6,4
12,4
6,4
13,4
6,4
"Diversificated" private farms per 10 sq. km (pcs/sq. km)
6,7
9,2
3,3
2,7
7,5
12,0
3,6
3,2
3,1
3,9
4,6
5,5
4,2
5,8
"Diversificated" agricultural enterprises per 10 sq. km (pcs/sq. km)
0,5
0,2
0,4
0,2
0,3
0,2
0,3
0,1
0,4
0,2
0,4
0,2
0,4
0,2
Non-agricultural activities of private farms (Total=100)
8,2
12,0
3,7
3,1
6,6
8,4
3,7
3,3
3,4
4,5
5,2
7,3
4,5
6,1
Non-agricultural activities of private farms, of which: dairy
0,1
0,1
0,1
0,2
0,1
0,1
0,1
0,1
0,1
0,2
0,1
0,2
0,1
0,1
Non-agricultural activities of private farms, of which: vine-making
6,5
11,6
2,4
3,0
4,5
7,3
2,3
3,1
2,1
4,3
3,4
6,5
3,0
5,8
Non-agricultural activities of private farms, of which: feed-mixing
0,1
0,1
0,1
0,1
0,0
0,0
0,0
0,0
0,0
0,1
0,1
0,1
0,0
0,1
Non-agricultural activities of private farms, of which:
transportation
Non-agricultural activities of agricultural enterprises (Total=100)
Non-agricultural activities of agricultural enterprises, of which:
dairy
Non-agricultural activities of agricultural enterprises, of which:
vine-making
Non-agricultural activities of agricultural enterprises, of which:
feed-mixing
Non-agricultural activities of agricultural enterprises, of which:
transportation
Full-time private farms (%)
114
Std. Var.
Avg.
Std. Var.
Avg.
Std. Var.
Avg.
Std. Var.
Avg.
Std. Var.
Avg.
Std. Var.
0,2
0,2
0,3
0,3
0,3
0,4
0,2
0,1
0,3
0,2
0,3
0,2
0,3
0,3
48,0
11,5
50,0
12,8
45,2
15,2
43,0
11,1
46,4
12,6
46,8
13,4
46,5
12,4
0,4
0,8
0,4
1,0
0,1
0,4
0,2
0,9
0,6
1,3
0,5
1,2
0,4
1,0
3,6
5,6
1,3
1,9
2,5
4,1
1,9
3,6
1,9
5,6
2,1
4,0
2,0
4,4
8,2
6,6
8,4
6,5
9,8
6,8
6,9
4,6
8,3
6,5
7,1
5,5
8,1
6,1
11,7
6,1
14,2
6,6
10,3
6,5
12,2
4,3
13,2
5,0
12,2
5,7
12,7
5,5
10,0
3,0
11,9
3,0
13,3
5,6
12,5
2,6
15,8
4,0
12,0
4,2
13,2
4,1