Rural Development The Second Pillar of the Common Agricultural Policy Dr. Rolf Moehler

How Rural Development made its way into the CAP The CAP started with Price and Income Support: The Treaty does not mention rural development Structural Policy began in the seventies, environmental programmes in the eighties Rural Development became part of the CAP with the McSharry Reform 1992 The big shift came with the CAP Reform of 1999 launched by Commissioner Fischler: Rural Development Became the Second Pillar of the CAP Most of the Programmes were not new but they were folded in a new concept based on the interrelationship between agriculture and rural economy & society

Rural Development Programmes Improving Competitiveness: –Improving the human potential –Restructuring the physical capital –Improving the quality of products Protection of the Environment and Land Management –Protection of the environment –Protection of less-favoured areas –Afforestation Diversification and Improvement of Rural Life “LEADER” All these Programmes Have in Common that They Do not Provide Price Support

Improving Competitiveness Improving the Human Potential: –Vocational training –Setting up of young farmers –Early retirement –Use of advisory services –Setting up of farm relief and management services Restructuring the Physical Capital by Investments in: –Modernisation of farms –Processing and marketing of agricultural and forestry products –Infrastructure connected with agriculture –Improving value of forests Improving the quality of agricultural products by assistance to farmers who –apply new EU standards –participate in food quality schemes –use advisory services on compliance with EU standards

Protection of the Environment and Land Mangement Improvement of the Environment and of Animal Welfare Going beyond Statutory Requirements e.g. –Reduction of fertilizers and pesticides –Reduction of stocking density –Preservation of the countryside e.g. hedges and trees –Elimination of batteries for laying hens Support to Farmers in Less-Favoured Areas i.e. –Mountain areas –Areas where land use is in danger of being given up –Areas with specific handicaps –Areas with faming restrictions (Habitat and Birds Directives) This Programme covers 56% of agricultural area of the EU Afforestation of land and the restoration of forests damaged by natural disasters and fire

Diversification and Improvement of Rural Life Diversification of Agricultural Activities Includes –Activities close to agriculture to provide alternative income. From 2007 as non- agricultural activities only activities of very small enterprises ( up to 9 employees and 2 million Euro turnover) may be funded –Encouragement for tourist and craft activities Improvement of the Quality of Life in Rural Areas includes –Basic services for the rural economy and population –Renovation of villages –Protection of the rural heritage

A Few Examples of Maximum Amounts –Setting up of young farmers: Euro per farmer –Early retirement: Euro per transferor/year –Agri-environment: 600 Euro for crops per ha –Less-Favoured areas: 200 Euro/ha –Loss of income from afforestation: 725 Euro/ha –Farm advisory services to meet standards: Euro/holding Support to Investment is Normally Limited to a Percentage of the Investment, e.g. –Investments in agricultural holdings: 40% –Setting up of young farmers: 45% –Processing and marketing: 40% Maximum Amounts of Support

LEADER This Is a special programme that supports grass root activities –The initiative has to come from the local population –Projects are being run by Local Action Groups that are typically a private-public partnership Projects may be chosen from any of the other rural development programmes but are not confined to these programmes In practice a project should cover an area for at least inhabitants and have a value of 2 million Euros.

The Ten New Member States The rules on rural development apply to the new member states, too In addition they benefit from support to –Semi-subsistence farmers –Setting up producer groups The new member states are no strangers to EU rural development programmes: they had already for some years access to most of the programmes under a preparatory programme (SAPARD)

Where Does the Money Go? 52.5 billion Euro are available in the seven-year period 2000/ 2006 of which 2. 1 billion for “LEADER”. Total expenditure is about the double because of co-financing. The lion’s share (52%) goes into environment protection and land management, followed by competitiveness (38%) and diversification and rural life (10%). Within the first category (environment & land management) expenditure on less-favoured areas (6.1 billion) is less than half of what is spent on protection of the environment (17.2 billion). Support to afforestation (12.6 billion) is not negligible either. Within the second category (competitiveness) investment in farms and in processing /marketing are the leading programmes followed by young farmers and early retirement No breakdown of the third category (diversification/rural life) is available

Implementation of Rural Development Programmes EU Rural Development Programmes are being implemented by member states under the watchful eye of the Commission Member states may choose among the 26 programmes available. Only the “agri-environmental” programme is compulsory. They had to submit plans for the period 2000/2006 for approval by the Commission. A plan may cover the whole territory of a member state or only regions or both In 2003 an evaluation by an independent body had to be sent to the Commission The programmes are being co-financed by the EU and member states As a rule the EU contribution is 50%, in less prosperous areas (75% of EU average GDP/c) 75%.

Outlook In 2007 begins a new 7 year planning period Last year the Commission has proposed a new regulation on rural development Under the proposal programmes will roughly remain as they are However, the administration will be simplified Council is expected to approve the proposal in June The main question is how much money will be available for 2007/2013. The Commission has proposed 89 billion Euro for the enlarged EU + Bulgaria + Romania