The Review of the Less Favoured Areas Scheme - European Union Committee Contents

Examination of Witnesses (Question Numbers 380-399)

Ms Charlina Vitcheva and Ms Neli Georgieva

5 MARCH 2009

  Q380  Chairman: That is very interesting.

  Ms Vitcheva: We do not have the intermediate zones based on socio-economic criteria that are a big pain for the old Member States. There is no such burden on us, fortunately.

  Q381  Chairman: So how are you classifying them? On what basis do you identify them?

  Ms Vitcheva: The 16.5 per cent that comes from the mountain areas is clear-cut. For the other LFAs we consider the soil fertility grid area, and there we have over eight per cent of our utilised agricultural land. This is in general what we can say about the area. On the side of the financing, LFAs cover two measures from Axis 2 under rural development and maybe it is good to indicate what proportion of the overall financing we envisage under Axis 2, which is land management, agri-environment and so on. Under Axis 2 we have 27 per cent of the overall envelope for rural development and out of that about 35 per cent is designed for LFAs. That means that about ten per cent of the overall envelope for rural development will go for LFAs. I do not know how it is in other countries but we consider ten per cent is not a huge amount. I can say that in our case because we are a new Member of the European Union and you know that eastern Europe has a lot of problems in general with the competitiveness of the sector, so one of the reasons for having a kind of role share is that we designate a lot of our EAFRD envelope resources to Axis 1 which is for investment in agricultural holdings and processing.

  Q382  Chairman: Can I take the non-mountain LFA area? The agricultural holdings that qualify for LFA payments in those areas, how important is the LFA payment to those farmers? Roughly what proportion of their income would come from LFA payments?

  Ms Vitcheva: We tried to make a calculation, but it was not very conclusive. The task was given to a research institute and it based the calculations on the lower yields in these areas. They were compared to the yields in normal areas, non-LFA areas, and on the basis of the difference in yields they calculated as a percentage how much less we have in general as production. The government decided to compensate 66 per cent of the loss which results from the lower yields. The proportion from the income I cannot tell you for the moment and I will tell you why. The Farm Accountancy Data Network is a network that compiles data on the accounting data which sets income, and we used the described type of methodology, starting from the difference of yields. Therefore, it is really difficult to say at this stage, what proportion of the overall income the LFAs support represents. Something that can help is if we compare what our agricultural producers in LFAs can get from the direct payments and the LFAs, it is 50/50. In an LFA one farmer will get per hectare one farmer will get 50 per cent as LFA support and 50 per cent from direct payments. However, it is important to know that in our case the direct payments are low and progress so that means that LFA will gradually decrease their share over the years.

  Q383  Chairman: So LFA at the moment represents approximately 50 per cent of the total CAP support?

  Ms Vitcheva: Yes; 50 per cent.

  Q384  Chairman: Finally, what sort of agricultural products are these farmers producing?

  Ms Vitcheva: I do not have this data but I guess it is rather varied because in our country we have almost everything with the exception of tropical fruit. Very often we are asked whether we are a tropical country because people think we have olives. No, we do not have olives, we do not have citrus fruits, but otherwise we have everything and the LFAs are more or less very evenly spread; we do not have a strong prevalence of any sector so that is why I cannot tell you about any specific sector—maybe the pastures, but that is for the mountainous areas. For the soil fertility it is again varied, my colleague tells me. Cereals maybe but in general almost every type of farming is covered.

  Q385  Lord Brooke of Alverthorpe: Could you say to what extent the abandonment of farmland is a problem or not in Bulgaria and, if it is a problem, which are the areas which are most at risk? Can you say if you understand the factors which lead to the land use change, and, where there is change, where does it end up?

  Ms Vitcheva: Abandonment is a severe problem and it is very much linked to the depopulation process in the rural areas. I will give you a few figures. In the rural areas in general, not just the LFAs, we have minus 12 per thousand natural growth of population, if we can call it growth, so the population is decreasing, and it decreases not only because births are double less than the number of deaths but because migration is negative, unfortunately, so depopulation is the biggest challenge and it leads to abandonment. Another factor for abandonment of land is our agricultural reform which took place at the end of the last century and the beginning of this century. That was the restitution of land to former owners and what happened was that many people that do not have a tradition of dealing with agriculture now have their land back and this land is often not cultivated and it kind of loses its status of utilised agricultural land.

  Q386  Lord Brooke of Alverthorpe: This is de-nationalisation?

  Ms Vitcheva: Exactly.

  Q387  Lord Brooke of Alverthorpe: Moving from the state back to the private owners?

  Ms Vitcheva: Yes. Which areas? LFAs, of course, because there the conditions are the most difficult for farming and, of course, LFAs suffer the most from abandonment and depopulation.

  Q388  Chairman: I can quite well understand that you are going through this process of agricultural reform and giving it to former owners and a lot of people will have no interest and just sit on it, but why do they not sell and why do you not get consolidation into larger farms rather than abandonment?

  Ms Vitcheva: In the first years especially the land price was very low and that hampered it very much. People were guarding their land in order to wait for higher prices because the expectation was for higher prices. Sometimes lack of clarity of ownership resulting from the reform creates legal uncertainty that does not allow for land amalgamation and consolidation. The government puts in a lot of effort, but sometimes it is very difficult for a country like ours, post-socialist, to try and introduce administrative measures to urge people to change. It is not possible in our case because it reminds the people of the old times when they were urged to enter the co-operatives, so it is very tricky. We even have projects, special government projects, for land consolidation. This policy gives results but it needs time.

  Q389  Lord Brooke of Alverthorpe: Sometimes abandonment of farmland can lead to planting of tree estates, forestry. Is this a policy which is being pursued? Would forestry grow freely there?

  Ms Vitcheva: We are trying to increase the forestry land but not at the expense of agricultural land. This measure, aforestation of agricultural land, is not popular at the moment. We are just at the start. We are beginning the rural development programme implementation now, so we still need to see how it is going to develop in the future.

  Q390  Lord Brooke of Alverthorpe: It is not popular in what sense, that people do not like the visual appearance of trees growing or that people just do not want to do it?

  Ms Vitcheva: This is one of the eligible measures under the rural development regulation, but in order to implement this measure you need a potential beneficiary that will be interested in doing that. We do not have people that are interested in doing that for the moment.

  Q391  Viscount Ullswater: I think you have answered very clearly how much of the budget is allocated to the Less Favoured Areas. I think you said that ten per cent of the overall envelope was the money. What are you seeking in return for this investment? Is it to maintain a rural population? Is it to maintain a landscape? What are the factors which you are looking for with the investment of this money and do you reckon, the way it is targeted, the way the LFA payments are made, that you are succeeding with it?

  Ms Vitcheva: Thank you for this question. We have our targets that are in the rural development programme now. They are varied. As you say, yes, we are seeking to stop the depopulation trend. We are seeking improvement and maintenance of the landscape. We would like to keep agriculture still in the LFAs because it seems to be the basic type of activity that is possible in the LFAs. Once we keep agriculture in these areas that means that the whole area will be viable, so these are the targets that we have. Our ex-ante analysis suggests that with the type of measures we envisage, including with the LFAs we will be able to achieve these targets to a certain extent, and the way the support is calculated with compensating the income foregone seems adequate to achieve these targets, but we cannot say what the exact results will be. We can only talk on the basis of the ex-ante analysis for the moment. We do not have experience. These are the targets. You very rightly pointed out the targets that we have for this measure, and, again, we think the method of calculation is appropriate in order to achieve these targets.

  Q392  Viscount Ullswater: Is that in order to boost tourism? Is that a factor that has a knock-on effect?

  Ms Vitcheva: Yes. I am not quite certain what proportion of the LFAs could benefit from rural tourism but this measure is again at the start. We had it under the pre-accession instrument, SAPARD. I do not know whether you have heard about SAPARD.

  Q393  Chairman: Yes.

  Ms Vitcheva: So rural tourism was under the diversification types of measures, so we have a very good interest in rural areas but more in the rural areas that are not LFAs. For the LFAs it is still agriculture that remains the basis and, of course, if we can put in more and more layers of economic activity that will only be positive.

  Q394  Lord Cameron of Dillington: Going on from that, I was wondering how the objectives that you have just outlined fitted in with the other agricultural payments, either in terms of Pillar 1 payments or environmental schemes. Where does the LFA fit in with that and what is the difference between the objectives of the packages?

  Ms Vitcheva: In our view LFA as an instrument has a very clear objective, to compensate for the worse conditions in these areas and to keep people staying there. In our view it is a clear-cut objective. For direct payments it is a little bit different. What we consider is that LFAs are complementary to the other types of support and our basic interest is not only to complement them in a good and efficient way but also to have full consistency among the different types of support. For example, for the LFAs one of the requirement is to have the good agricultural and environmental practice fulfilled. If not, of course, they cannot be eligible. That means that in terms of keeping the environment in general, not just agri-environment, there is consistency. It is the same with direct payments and cross-compliance. We have to be very consistent and in accordance with the EU law requirements. We think it is complementary and we think it has its own role. In our case, with the mountainous areas, the projected outcome of that measure is extremely visible.

  Q395  Lord Cameron of Dillington: So there is quite a strong environmental element to the Less Favoured Area payment?

  Ms Vitcheva: Yes, because in terms of keeping the agricultural activity in these areas, take, for example, the ones that are related to steep slopes, the inclination over 15 per cent, if we do not have agricultural activity there, there is going to be erosion of these areas, so there is a clear link between keeping the landscape and the good environmental situation of the region and the LFAs support.

  Q396  Chairman: Where does skiing fit into this?

  Ms Vitcheva: It is in the high mountains, not on the agricultural land.

  Q397  Earl of Caithness: I think you answered my question about biophysical criteria when you answered the first question, so I would like to ask a completely different question of which you have had no notice. Given that you have just started this scheme, it has been running for a year, do you support the Commission in their idea to change the LFA structure now or would you rather let the system which you have started settle down and wrap it up as part of the CAP reforms to 2013?

  Ms Vitcheva: If I correctly understand the question, maybe for the old Member States it is an important question because, as I said, the old Member States have the burden of the past and they still have areas that are not going to be eligible in the next programming period most probably. In our case we also have some differences in terms of area if we consider the current way of designation and the way of designation that the Commission has as a project now. Our interest will be to keep the system as it is to the end of 2013 and then any reform that is decided for the LFAs to become part of the CAP beyond 2013. We would not like to see changes in the meantime. We are going to have in 2011, for example, maybe an agreement on LFAs. By the end of the programming period there will be only two years left. Why should we disturb the system? Of course, there is something very important here. We do not have areas under socio-economic criteria. I understand this is the basic problem for the Commission and therefore for many of the Member States. We do not have this problem, so if there is any difference of area designation it will appear as a result of different biophysical criteria, not socio-economic criteria. The difference comes from the soil fertility criteria—currently applied and newly considered. We compared the maps that we have in both cases and some areas which we thought were more LFAs disappeared and some new ones appeared that we did not consider as LFAs. So obviously, there should be some kind of refining of the criteria that are now considered for soil fertility.

  Q398  Earl of Caithness: Given what you have just said, do you think there ought to be two levels of criteria, the EU level and the Bulgarian level, so that you can add in bits of land that you think are important for LFA support?

  Ms Vitcheva: It is a very tricky question. On the one hand it is important to have a level playing field, so I think that any diversion of criteria or any discretion that is given to any Member State in terms of taking on board the specificity of the country is okay as long as it does not spoil the competitive environment. We cannot be against it but there should be a very good balance between harmonisation in order to achieve a good competitive environment and on the other hand taking on board the specificity of every country. It is rather tricky so we need a balance there.

  Q399  Chairman: It is incredibly rational.

  Ms Vitcheva: We are trying to be.

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