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Moldovan's agriculture structural deficiencies
20 April 2004

What is striking is that in such agricultural country as Moldova is, agriculture lags far behind its neighbours both in terms of development and technical equipment. Overall economic efficiency of Moldovan agriculture is very low, out of the total agricultural enterprises only 35% are lucrative. While agricultural and food products account for more than 60% of Moldovan exports, only 12.8% of the total investments since 2002 went to agriculture. An average Moldovan farmer feeds 1.5 persons, whereas an European one 15. Therefore, on average labour productivity in Moldova is 15(!) times lower than in EU. Another evidence to the agriculture's deficiencies is the average cereal harvest, i.e. 20 quintal per hectare over EU's 55.

There are several factors behind such a discrepancy. Moldovan agriculture's inertia is largely due to ethno-psychological factors. In rural area family members is the main labour force for farms, whereas agricultural works are not mere occupation or source of income, but rather. Many peasants are so much committed that they spend much of their time in hard work. Large-scale exodus of rural population is yet another evidence to the excessive concentration of population in the restricted rural area.

Yet, despite those deficiencies one should exploit the opportunities provided by labour force migration if there is no room for it to be used at home. Collateral costs left aside - including psychological ones, such as the effect of families torn apart or children left home alone - to a certain extend labour force exodus is preferred to work at home, as the income is much higher. Noteworthy, money transferred by Moldovans working abroad in 2003 alone have reached 400 m USD.

Another factor speaking to the deficiencies of Moldovan agriculture is the country's tiny territory and relative homogenous landscape, which makes it rather difficult to spread the risk between various climate and geographic zones and makes the country particularly vulnerable to unfavourable climate conditions and natural disasters. Agricultural production has significantly dropped over the years and significantly eroded farmers' chances to make a living on working private land. On top of that, irrigation system was destroyed as was fertilisation one, which decreased genetic variety of the species, both in crops and husbandry. Given the lack of insurance in agriculture, Moldova boasts the highest dependence of harvest on climate. The situation gets even worse due to excessive fragmentation of agricultural plots. Under those circumstance Moldovan exports consist mainly of maze and sunflower, which as a rule are low competitive.

There are few and definitely not enough structures, private or public, that would monitor foreign agricultural markets and provide informational support to domestic farmers. Farmers still find it hard to get credits, which has decreased investments in agriculture and eroded chances of developing a profitable and efficient agricultural sector. There are no clear-cut and transparent rules for the operation of an agricultural market or Agricultural Exchange that makes it hard to get information. Conversely, it helps the state and certain specialised companies hold the monopoly in the field, or even worse, to resort to administrative levers in acquisition of agricultural products.

Incomplete privatisation of agricultural machinery and equipment has enabled "Joint Stock Companies" or "Production Associations", which are not that much different from the soviet kolhoz or sovhoz, to take them under control. The mere fact that the structure of farming hasn't evolved much towards more democratic forms of organisation brings to light deep contradictions between the desire to reform on the one hand, and technical and material possibilities on the other.

There are a number of opportunities, such as to tap into WB or EBRD's funds that have opened several quite cheap credit lines for projects in agriculture at several domestic commercial banks. Another opportunity, not fully exploited yet, is to mobilise local funds via Savings and Loans Associations. In addition, Moldova is known for its organic food, which is in big demand on EU markets. In general, prices on EU markets are much higher than in Moldova that leaves room for fat profit margins, and this only if Moldovan farmers manage to seize strategic niches on those markets.

Association to EU would open new opportunities to develop Moldovan agriculture and raise living standards in rural communities by exploiting European structural funds (such as FEOGA) that are financing projects on regional development. Even the disadvantage of might open new possibilities to modernise agriculture by easy access to the latest European developments in agriculture.






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