2.2 Relation to the National Development Plan

The National Development Plan outlines the overall development strategy for the country as a whole with a view to narrowing the development gap between Lithuania and the EU countries. Hence, the NDP overall national objectives are inserted at the top of the figure.

As illustrated, the strategy for the development of rural areas in Lithuania will have to follow closely national development objectives. These are concentrated in the following three bullets:

·        To achieve accelerated growth in real GDP and employment, as well as higher living standards relative to the more prosperous regions of Europe;

·        To obtain higher competitiveness of the national economy relative to the more developed regions of Europe; and

·        To reduce regional disparities within the country by creating favourable conditions for social-economic development in the most backward regions.

The strategy also assumes that there will be public support for the view that national development should respect the following national principles, which also correspond to and support the overall national objectives:

·        The rural population with its skills, capacity for work, closely knitted social structures, values and culture is an important national asset.

·        The natural environment and built heritage of rural areas are vital ecological, educational and economic resources. Development should not compromise the ability of future generations to enjoy these assets.

·        The even distribution of population and settlements of Lithuania could ensure reasonable access to urban-based growth for the country’s population with reduced risk of property and wage inflation, traffic congestion and unnecessary consumption of fossil fuels. Development should seek to reinforce this spatial equity and in particular ensure that the rural population will have reasonable access to urban-based growth employment and services.

The overall national objectives of the NDP and the fundamental principles outlined above constitute the frame within which the Rural Development Plan will be implemented.

 2.3 General Rural Development objectives

The next level in the objective hierarchy is the RDP level. In close collaboration between Lithuanian competent authorities and bodies and economic and social partners, the overall vision of agriculture and rural development has been formulated as follows:

“To make a balanced contribution to the economic, environmental, social and cultural well-being of rural areas and the country as a whole, through partnership with the private sector and local communities.”

The Rural Development Plan prepared by the Ministry of Agriculture has translated this overall vision into a number of general objectives for rural development: These are:

·        Provision of additional income for farmers and rural dwellers as well as increased income levels leading to improved living standards and working conditions in rural areas;

·        Improved competitiveness and efficiency of primary agricultural production;

·        Improved processing and marketing of agricultural produce through increased efficiency and competitiveness;

·        Improved quality and hygiene standards;

·        Achieving a sustainable rural development through promotion of farming and other economic activities in harmony with the environment;

·        Creation of employment opportunities in rural areas;

These RDP general objectives follow naturally from the NDP overall national objectives as illustrated in the figure. Further more, the general objectives for rural development are made operational through the general objectives of the SAPARD programme as outlined in the Council Regulation (EC) No 1268/1999. They contribute to the acquis communautaire concerning the CAP and related policies and solving priority and specific problems for rural sustainable development, as illustrated at the next level of the figure.

As it is apparent from the figure, the SAPARD general objectives are supplemented by national objectives for complementary national programmes as well as bilateral programmes on the left side of the figure, and multinational end EU co/operation and programmes on the right side of the figure. The objectives of these actions and programmes are described briefly in section 2.X below.

Returning to the SAPARD general objectives, the main strategic focus of the SAPARD programme is to establish a favourable environment for economic, social, environmental and ethno-cultural rural development, gradually leading to improvement of the quality of life and facilitating the conditions for integration into the European Union.

  2.4 Geographic scope of the Plan

The Rural Development Plan will be applied throughout all rural areas, defined as all areas except district (rajonas) centres and settlements with city status (e.g. Palanga, Visaginas, etc.). Exception is provided for agro-processing industry, since a considerable number of agro-processing enterprises (directly or indirectly related to the development of rural areas) are located outside rural areas. Agro-processing industry enterprises located outside rural areas are eligible.

  2.5 SAPARD Priorities

In accordance with article 1 of the SAPARD-Regulation, Community economic support is provided for sustainable agriculture and sustainable rural development measures for the pre-accession period within priority areas. This support will comply with the conditions laid down in the framework of the Accession Partnership.

The analysis of the strengths and weaknesses of Lithuanian rural areas as well as of the opportunities and threats to the agricultural and rural development suggest that pursuit of the overall vision for rural development require action in the following priority areas, see figure:

1.      Agricultural production;

2.      Processing and marketing of agricultural products;

3.      Diversification of economic activities in rural areas;

4.      Rural Infrastructure and Environment;

5.      Forestry

6.      Human Resources Development, Training, Information and Bottom-up Involvement;

These priorities are made operational by 6 specific measures presented below focusing on the specific objectives of the individual measure. These measures will be implemented in the program period as the main instruments in the RDP, and are generally presented in chapter 4 and in detail in annex II: Technical sheets. See also figure for a concentrated presentation of the specific objectives of each measure.

2.5.1. Agricultural production

The priority area is selected taking into account that Lithuanian agricultural sector has been playing an important role in the rural and in the whole national economy as well as in social life. Presently, the sector produces more than 10% of GDP, and employs more than 21% of total employment. However, Lithuanian agriculture has to improve competitiveness and increase productivity, efficiency and quality of products, in order to make a contribution to economic growth and employment over the next decade, as well as guarantee adequate and stable incomes for rural population. The sector has to tackle its major drawbacks – low level of efficiency, fragmented production and poor quality of produce.

In order to improve competitiveness of agriculture, the specific strategic actions required in this priority area are to:

·        modernise farming with the aim of creating a competitive business;

·        establish specialized farms complying with EU requirements;

·        provide support to setting-up new farms;

·        provide support to young farmers;

·        improve breeds and seeds;

·        implement quality and hygiene standards;

·        improve storage and hygienic handling of produce;

·        re-orientate agricultural production towards products with growing demand;

·        restructure farming and constantly improve economic viability of farm business;

·        provide support to farmers in less-favoured areas;

·        improve animal welfare;

·        promote farming in harmony with the environment;

·        improve in the handling and storage of farm wastes; and

·        support investments, which are targeted towards meeting environmental requirements.

The actions will also make use of the agriculture and rural areas strong points, such as traditions in agriculture, advantageous natural conditions for livestock production, availability of young people in rural areas.

With the aim of assisting agricultural holdings to make improvements in the farm business and increase competitiveness, the SAPARD programme will contribute by providing grant aid for capital investment in farm machinery, farm equipment, buildings and other production facilities. The programme would be targeted on economically viable family farms, producer groups and other agricultural holdings.

Particular focus will be laid on young farmers and farm businesses in less-favoured areas. For these applicants, grant aid will be provided at a higher rate. Similarly, special attention will be paid to producer groups at all levels of the production chain. In addition to aid for capital investment, cost of formation and operating expenses (e.g., legal fees, administrative costs, and insurance) will be partly covered.

Additional support to organic farming is considered to be mitigation actions on the possible negative environmental impact caused by intensive agricultural activities. Agricultural holdings involved in organic farming (certification is required) will be provided of higher level of grant aid, and additionally, premium payments will be available (financed by the national measure).

The specific objectives will be to create a network of approximately 100,000 family farms of average 15 hectares size (in 2006). The major targets are development of competitive agricultural holdings producing dairy and meat, fruits and vegetables, cereals, flax.

A substantial amount of capital investment is required to achieve these objectives, and make farming competitive. For that reason, it is planned to allocate nearly a half of the total public funds to grant aids for investments in agricultural holdings. Expected number of projects granted aid is 7,300, of which 2,000 – to young farmers.

2.5.2. Processing of Agricultural Production

Processing is also of great importance to both Lithuanian industry and rural areas. On the one hand, it produces about one third of total industrial output. On the other hand, agricultural sector is strongly dependent on the processing industry due to the fact that  processing enterprises usually process local agricultural produce.

Similar to the agricultural sector, Lithuanian processing industry is fragmented, characterised by over-capacities, and is not efficient enough to compete successfully. To build a competitive food industry, the strategic actions pursued will be targeted on:

·        sector restructuring;

·        development of higher value-added products;

·        fulfilment of hygiene, food safety and quality standards;

·        introduction of environmentally friendly technologies;

·        improvement of efficiency; and

·        improvement of the structure for quality, veterinary and plant-health controls.

In the processing of agricultural products, the SAPARD contribution will be to assist processors of agricultural products to increase the efficiency, quality and value of their products, invest in minimum waste technologies, meet EU and national environmental, hygiene and health standards, and provide a better service to their farm-suppliers. Since the further development of meat processing industry closely depends on establishment of slaughterhouses complying with the EU requirements, special attention will be paid to the investment.

The specific objectives in the priority area are to build the food processing industry to be able to meet EU requirements on hygiene, food safety, health, quality and environment, and to be able to compete successfully in domestic and external markets. The targets (at the end of programming period in 2006) are:

·        170 meat processing enterprises (including slaughtering, cutting, poultry meat and meat preparations) meeting EU requirements and producing approximately 21 thousand tonnes of meat;

·        establishment of rendering system, including rendering plant meeting EU requirements;

·        35 dairies meeting EU requirements and processing 2.1 million raw milk;

·        35 fish processing enterprises meeting EU requirements.

In order to meet EU requirements on hygiene, food safety, health, quality and environment, a substantial amount of capital investment and development of human resources will be required. For the reason, nearly 20% of public funds will be allocated in the improvement of processing and marketing of agricultural and fisheries production. It is expected to grant aid for up to 70 beneficiaries.

2.5.3. Farm Diversification, Alternative Income and Employment Opportunities in Rural Areas

Bearing in mind that structural changes in agricultural and food processing sectors will effect rural employment, it is important to create favourable conditions for farm diversification, employment opportunities and additional income in rural areas.

In order to create opportunities for employment and additional income, the SAPARD contribution will assist rural businesses to undertake and develop new activities as well as promote alternative farm enterprises involving non-surplus products.

With the objectives of creating new employment and providing additional farm income, support should be available for alternative farm and rural enterprises involving non-surplus products, e.g. inland water fisheries.

Rural tourism that exploits rich natural and cultural resources also represents a high potential for provision of additional income and creation of new job opportunities in rural areas.

Apart from on-farm diversification, there is a need to develop the non-farm rural sector, and encourage rural dwellers to undertake new activities. Support will be provided for the development of small firms, craft enterprises and local services and exploitation, as well as to marketing of local agricultural, forestry and fisheries products.

All the proposed actions aim at minimising rural population dependence on agricultural sector and creation of new employment. The target is:

·        47% of total rural employment by 2006 (compared to 58% in 1998);

·        27,000 employment places (including part-time) created during the whole programming period 2000-2006.

Capital investments and development of human resources are required in order to promote on- and off-farm diversification, create opportunities for employment and provide additional income for the farmers. It is expected to allocate to the priority are approximately 14% of public aid and provide grant aid for 2,600 projects.

2.5.4. Rural Infrastructures and Environment

Lithuanian rural areas considerably lag behind the urban ones in terms of physical infrastructure. This drawback is considered to be of the highest ranking. On one hand, rural people can not experience the adequate quality of living. On other hand, poor physical infrastructure in rural areas causes environmental contamination and additional problems.

With the aim of improving working and living conditions in rural areas, the SAPARD programme will target improving rural technical infrastructure, village renovation and natural and cultural heritage protection. Aiming at maximising the impact on the Rural Development Plan objectives, preference would be given to actions integrating with rural tourism and involving rural communities.

This priority area was chosen to prevent environmental contamination caused by poor rural infrastructure, preserve rural heritage, minimise gaps between rural and urban infrastructure and quality of living, and introduces environmentally friendly technologies.

The specific strategic actions in this area are as follows:

·        improve technical infrastructure in rural areas (e.g. water supply, sewage, road and telecommunications systems);

·        renovate villages;

·        establish and reinforce rural cultural centres;

·        reconstruct of land reclamation systems in harmony with environment; and

·        improvement and protection wildlife habitat.

It is planned to allocate approximately 16% of public funds to the actions proposed. During the programming period, the public funds will be granted to 1,700 beneficiaries.

2.5.5. Forestry

Forestry development and afforestation are other alternatives for the use of agricultural land. Furthermore, forestry is in itself an important economic activity in rural areas. Afforestation is able to provide new long-term employment opportunities in rural areas. To a large extent, forestry sector plays an ‘alternative to agriculture’ role. However, the private forestry is underdeveloped, mainly due to unfinished land reform. For the reason, it was decided to include actions related to forestry in a specific measure on forestry.

The measure is focused on the development of the economic, environmental and social functions of forests in rural areas with a particular emphasis on afforestation of abandoned agricultural land, strengthening of forest extension services and producer organisations and investments in forests.

The targets at the end of the programme period is as follows:

-         Area afforested:                                                      9,000 ha

-         New jobs:                                                              4,500 jobs

-         Information material, brochures etc:             150,000 units

-         Number of training courses arranged:                      200

-         Number of participants:                                           4,000

-         Increased production of non-wood

-         forest products, in percentage:                                 15

-         New SMEs in forests:                                             30

-         Increased recreational areas, percentage:                 10

It is expected to allocated approximately 6 percentage of total public support in the RDP to this measure leading to the implementation of more than 1,500 projects.

2.5.6. Human resources Development, Training, Information and Bottom-up Involvement

The development of human resources is the key factor effecting positive changes in rural development. Farmers and rural communities require assistance in establishing rural business or diversifying farm production to generate additional income or employment.

Focus will be laid on young people taking up rural businesses, and rural adults engaged in farming or establishment of rural business.

The specific objective is to provide strategic knowledge and technical information necessary in the transition period from price support to market-led industry, and whilst adjusting to hygienic, environmental and animal welfare requirements.

  2.6. National contribution and other programmes

As indicated in a previous section the SAPARD priorities are supplemented by national and international programmes. This is illustrated in the figure as well, and is described below.

2.6.1.National programmes

The national programmes will complement the SAPARD actions by mostly continuing the previous Rural Support Fund programmes. The list below (

Table 25) indicates the national programmes selected and approximate allocations of funds (in percentage of total national programmes).

Table 25 Proposed national programmes in the Rural Support Fund of 2000

Source: the Ministry of Agriculture

The major share of funds is allocated to the programmes related to the accession to EU:

·        Animal registration and identification programme includes establishment and maintenance of cattle accounting system, establishment and maintenance of central and regional databases (premises, machinery, hardware and software), earmarking equipment and training of technical staff. State Veterinary Service and Rural Business Development and Information Centre are responsible institutions for the implementation of the programme.

·        Parcel declaration programme. Eligible costs are establishment of the central database and purchase of a software, establishment of a regional databases, preparation and publication of a parcel information forms. Rural Business Development and Information Centre is the implementing institution of the programme.

·        Stock-breeding programme. The programme includes animal productivity control and evaluation, compensations for purchase of animals for breeding purposes and publication of stock-breeding sector achievements. This is administrated by Animal Breeding Control Service under the Ministry of Agriculture

·        Support to the development of agricultural resources and product quality analysis system which includes modernisation of laboratories’ equipment and renovation of premises; implementation of milk content and quality evaluation system, establishment and implementation of meat quality evaluation system.

·        Training and consultation. Training of trainers, advisory services to farmers, improvement of agricultural specialist qualifications and research in agriculture, food and fisheries sectors are financed under the programme.

Another group of measures is a support to family farms and other agricultural entities:

·        Compensation for interest costs. The measure comprises of three actions: (1) compensation for long-term loan interest costs. Farmers and their co-operatives are eligible for aid; (2) compensation for short-term loan interest costs. This is targeted to family farms and other agricultural entities; and (3) aid for agricultural production processing enterprises, in case they withdraw short-term loans for purchasing of agricultural production (seasonal surplus).

·        Compensation for losses caused by adverse weather conditions and animal decease. Family farms and other agricultural entities are eligible for the aid.

·        Support to organic agriculture farms. Aid is provided in a form of direct payments per hectare of utilised agricultural area certified for organic farming.

·        Co-operation development. This national measure concentrates on technical assistance and promotion of co-operation among Lithuanian farmers. The principal implementing institution of the measure is the Chamber of Agriculture.

2.6.2. Phare programme

Similar to the previous actions, and in accordance with the general objectives of the Phare programme, the programme will continue to target the institutional building issues thereby contributing the pre-accession process:

·        Improvement of structures for quality, veterinary and plant-health controls including improvement of border control posts;

·        Support to strengthening capacity to manage the Common Agricultural Policy including technical assistance, pre-accession advice and related investments;

·        Support to establishment of integrated farm register and agricultural information system;

·        Support to strengthening rural administration structures including technical assistance and related investments for development of IACS, FADN, economic accounts for agriculture;

·        Support to development of administration and capacity to implement the Common Fishery Policy. This will include technical assistance, pre-accession advice and related investments, establishment of Vessel Monitoring System, improvement of fish research laboratories.

Other bilateral and international actions will be developed and implemented in a way supporting the general objectives of the RDP as wall as of the SAPARD programme.

2.7.Expected impact of the investments

It is expected by the Lithuanian authorities that the implementation of the SAPARD programme and the RDP in its entity will lead to the fulfilment of the stated general and specific objectives.

The development in rural areas will be intensified as a consequence of the programme implementation. Modernisation of agricultural holdings through investments in machinery, feed and breed as well as in human resource development will lead to increased competitiveness of the agricultural sector with positive impacts such as increased income levels, increased living standards and employment opportunities. This structural development comprising a trend towards less but bigger farms also has its negative aspects.

As regards employment, the objective is to increase the number of viable farm households, while at the same time acknowledge that increased competitiveness will lead to withdrawal of inefficient farmers from the agriculture sector. Therefore, it will be necessary to build up alternative employment opportunities. Employment creation will mainly be through on- and off-farm diversification, agri-processing, rural tourism and development of other services.

Although there are many unknown variables - as the SWOT analysis has illustrated - which could affect the overall development in the agricultural and rural areas in the period 2000-2006, the following indicators and quantified forecasts represent a reasonable scenario.

While constructing the scenario, it was assumed that:

1.      Land restitution will be completed by the end of 2000.

2.      Agricultural employment will annually decline by some 0.5% on average. The decline will be caused by (a) retirement of elderly farmers, and (b) rural people taking up other businesses.

3.      The proportion of young farmers will grow, as elderly farmer will retire, and higher level of support  to young farmers will encourage them to take up farming activities.

4.      Growth of rural household disposable income will catch up the national average

5.      The productivity of main agricultural production will grow influenced by (a) investment in agricultural holdings, and (b) inefficient farmers going out of the business.

In conclusion, it is the assessment of the MoA that the implementation of the SAPARD programme will lead to the fulfilment of the articulated and presented objectives being general as well as specific.