index.1.jpg (3032 bytes) Note 6 – May 2003 

Moldova's agriculture: crisis or rehabilitation?
 by Alexandr Muravschi

Moldova's agriculture has demonstrated certain success during the last two years. After a decade of decline one can observe for the first time growth in agricultural production. It is also important that in 2002 there was growth in the livestock products. With the account of the developing tendencies, the Ministry of Agriculture projects a 10% growth in the agricultural goods production volume in 2003. At the same time, on the initiative of the same Ministry, the Government accepted on March 31 a special Resolution on the situation existing in the agrarian sector of the Republic and the measures to be taken in order to do the 2003 agricultural spring works within optimal time. Mass media reveals more and more materials about a critical if not catastrophic situation in the agrarian sector. This leads to the conclusion that our agriculture has not yet developed any resistance to weather contingencies and the slightest changes of the latter cause considerable positive and negative differences in the production volume. But can this go on forever? Every year Moldova experiences a heavy hail, spring frosts or drought. These phenomena often serve as a justification for the governing bodies in their failures. However, developed countries' experience shows that it is possible to resist nature knowing how to use the agrarian's economic leverage. Can Moldova create such mechanisms?

In order to answer this question, we should shed light on the main factors that have brought about the production growth during the last two years and focus on their further intensification. For the time being, they are not so numerous, which simplifies the analysis. It is true that no serious change has taken place in the policy of the current Government as compared to that of the predecessors. The fiscal policy in agriculture has remained practically unchanged. The subsidies did not grow. No collectivization happened. Only the administrative pressure on economic entities has grown, some export restricting steps have been taken, while the number of the meetings held has increased. Thus, the Resolution mentioned above emphasizes the need for teleconferences, discussions, meetings and so on. But all this has rather a negative than positive impact on the agricultural development.

The growth results from the following factors:

- overall economic growth of Moldova's products major consumers, i.e. Russia, the Ukraine and Romania, which increased the volume of its agricultural export to these countries and consequently resulted in the production growth;

- private sector in agriculture has practically finalized its stage of formation and entered the stage of adaptation to the market conditions. This is the reason for the Republic's quick recovery after the crashing regional financial crisis of 1998-1999;

- performance of the projects created with donors' financial support in order to create market infrastructure in agriculture (farm stores, business cooperatives, machinery and technological centers);

- grown increase of financial resources in agriculture coming both through commercial bank system and through alternative sources (Savings and Credit Associations, Microfinance Alliance, etc.);

- private (privatized and newly created) processing enterprises started more actively creating their own raw materials source and support farmers.

All this means that Moldavian agriculture has overcome its most difficult period and started recovering. However, a lot is still to be done for the success to be strengthened.

First of all, owners should be given the right for choosing the ownership form and type of economic activities. In this context, the growing pressure of authorities on peasants and their leaders aimed at the rehabilitation of the collective sector disguised as creation of production cooperatives is difficult to understand. No other country sets the goal of creation of production organization forms as a matter of paramount importance in its agrarian policy. All types of enterprises appear as a result of owners' interests and aspirations. This is the reason why production cooperatives cannot practically be found in the developed countries' agriculture because in them an owner loses its individuality and a de-facto ownership rights. The production cooperatives that our collectivization advocates are so fond of speaking have nothing in common with farmer cooperatives in the West. The major purpose of the first stage in the agrarian reform was to form a class of owners able to independently take decisions on the ways of their development. This class is coming into being in agriculture and needs to be supported.

Secondly, it is necessary to strengthen the efficiency of the economic mechanisms stimulating agricultural land consolidation and concentration in the hands of the most effective users. For this purpose, it is necessary to maximally simplify the land sale/purchase procedures and adopt a law on lease that would strengthen the lessees' rights. It is necessary to study Hungary's experience on the payment of special compensations to the pensioners having decided to sell their land.

Thirdly, it is necessary to ensure the influx of funds in agriculture. At the same time, it is necessary to take into account that agriculture by itself is not very attractive for investments, which is true not only for Moldova. The major flow of agricultural investments may come only through the processing industry. For this reason, it is necessary to quickly finish privatization of the remaining wineries and tobacco factories including the Chisinau tobacco factory and to ensure full guarantees for the investors' normal work regardless of the political leadership changes.

Fourthly, the Government and the Ministry of Agriculture should specifically focus on improving the export regime. At the same time, the possibilities that Moldova obtained in the context of its joining the WTO should be used to the maximum including settlement of disputes caused by some restrictions imposed by the EU countries.

Fifthly, with the account of Moldova's limited possibilities in the state subsidizing of agriculture, the subsidies should be concentrated in the most perspective directions. The losses caused by hail, downpours, etc. should be compensated mainly from the agricultural production risk insurance system.

Sixthly, the work on the agricultural sector's infrastructure should be continued, i.e. networks of veterinary centers, artificial insemination centers, wholesale markets, agricultural machinery repair and maintenance centers should be created.

The dependence of Moldova's economy on the whims of nature will decrease and the Republic's agriculture will become competitive on the world markets, while the villagers' income will grow only provided that all the measures mentioned above are observed along with the macro-economic stability preserved and other industries of economy and primarily the non-agrarian sector in the rural areas developed.