Is Agricultural Sector in Moldova Doomed?

Vladimir ROTAR

Agricultural sector is going through another crisis – experts are sounding the alarm, predicting the ruin of thousands of farms already this year. Does the government have a chance to handle the problem? Should we wait for EU aid or is the industry about to face tough times? 

The discontent and protest moods of farmers are turning chronic. During recent weeks, they have become more politicized due to the sharp criticism of the government’s actions and demands to dismiss minister of agriculture Vladimir Bolea. At one point, farmers even demanded negotiations with the personal participation of the speaker of parliament and the president, but political technologists of Maia Sandu prudently detached her from this futile story. As a result, only premier Dorin Recean in the company of the agriculture minister engaged in a direct dialog. As expected, the meeting with the officials gave no relief to the agrarians, who now not only promise to initiate large-scale protest actions during the upcoming public holidays, but have also announced plans to file collective complaints against the authorities to foreign embassies, such as Romania, USA, EU, etc. Naturally, such a crisis during the official start of the election campaign is highly annoying for the ruling authorities, and they would probably like to nip it in the bud, with a minimum media buzz. But does the government have enough leverage and resources to manage that? And should farmers really rely on foreign partners? Or their only hope is Moldova’s accession to the EU? Let’s explore. Old and New Challenges It is quite obvious that the national agricultural sector is affected by a number of negative factors. Some of them have been in place for years – poor labor productivity and lower yields than in the EU, limited technology, small share of irrigated land, lack of a strategic vision of development. These problems combined with periods of drought, which periodically affect our territory, in the past years led to massive protests of farmers who demanded centralized support measures from the state. However, in recent years the situation has worsened sharply. The war in Ukraine and the creation of so-called “solidarity corridors”, i.e. unimpeded and duty-free export of Ukrainian crops, including through Moldova, have had a particular impact. The government, despite promises, has never resolved to implement a full-fledged protectionist policy, as other countries of the region have done, as a result of which farmers could not compete with cheap agricultural products of the neighboring state. There were also logistical hurdles due to the fact that infrastructure facilities were also occupied by Ukrainians. Traditional problems multiplied by Ukrainian dumping, objective climatic changes, which led to more frequent droughts and crop failures, increased agricultural costs, primarily in terms of fertilizers and energy resources, have placed our farmers in the most vulnerable position. Many of them, especially those categorized as small and medium, suffer heavy losses, which means that they cannot repay their loans to banks and go bankrupt. Are farmers’ demands feasible? Experts predict the collapse of hundreds and even thousands of people already this fall, if emergency measures are not taken. In particular, the following demands are voiced – to declare a state of emergency in agriculture to freeze fines on overdue loans and short-term stabilization; to stop the process of forced debt collection; to seek support from external partners; to start developing a national plan to transform the industry. As we know, the only response from the state was a promise to allocate 100 million lei in aid to cover the losses. Farmers call this amount “a drop in the bucket” and consider it a short-term solution that will not change anything globally. And they are quite right. On the other hand, the authorities do not actually have many options to really normalize the situation. For example, I do not see much prospect of settling the issue of refinancing of farmer loans with banks. The Moldovan banking system is just nominally Moldovan, as de facto it belongs to external actors, as my colleagues noted. Therefore, exerting significant political pressure on them is hardly a realistic option. The banks themselves have no reason to lose profits and make concessions to bankrupt clients. The government understands all this, so Minister Bolea has no choice but to defend the idea that the state of emergency is “pointless” and to advise the farmers, in fact, to negotiate with the creditors themselves. As for the development of a national program to transform the entire agricultural sector, it can only be effective if it is truly comprehensive and ambitious, as palliative measures will not suffice. And here everything rests on the problem of competencies and costs. Foreign partners are expected to help with both the former and the latter. The agrarians urge to turn to them for operational support as well. However, according to Vladimir Bolea, three letters on this matter have already been sent to the EU but no response was given. Why is there no aid from the EU? Such disregard looks logical. When analyzing the EU farming trends, one can conclude that the hopes of our officials and farmers to be aided form abroad seem to be greatly exaggerated. First of all, because European agrarians are now facing many problems. Like their Moldovan colleagues, they are suffering greatly because of the Ukrainian crisis, which has led to a drop in prices for products and increased costs for raw materials and fuel. In addition, the green transition policy, which implies such aspects as reduced reliance on pesticides and fertilizers, or allocation of a large number of lands for non-agricultural use, is also a serious strain on their wallets. Of course, the EU has programs to support the industry worth hundreds of billions of euros under the Common Agricultural Policy, including direct payments, so-called “subsidies per hectare”. But this “umbrella”, which has safely sheltered European farmers for many decades, is becoming more and more vulnerable. Brussels is curtailing protectionist measures, as it opens its market to other countries that do not have such strict farming requirements. This, by the way, was one of the reasons for the large-scale farmer protests that swept the EU earlier this year. There are tendencies to reduce support at the level of individual countries. Even Germany, one of the EU engines, was forced to consider plans to abolish diesel discounts and tax breaks for farmers in order to save money, which were adjusted amid unprecedented protests. Thus, agriculture in the European Union itself has its own problems, and, perhaps, that is why similar problems in Moldova do not find much support and desire to provide prompt relief. Another curious trend in the EU is the enlargement of farms, which is already under way – since 2005 the number of farms has shrunk by a third. The reasons are obvious – it is increasingly difficult for small farmers to maintain the profitability of their farms even in the conditions of European support and subsidy programs. The statistical indicators of the new EU members show us the same: while there are undoubtedly positive changes, such as growing investments, labor productivity, yields, incomes, the trend of reduction in the number of workers in agriculture remains unchanged. Therefore, my response to the question in the title is as follows – of course, the industry is not doomed, but unfortunately, few will survive in it. I can understand the cold logic of the European bureaucracy, which, with small temporary deviations, is steadily on the road to modernizing the sector in line with the climate agenda, despite all the ensuing problems for farmers. After all, the share of agriculture in EU GDP is very small, less than one and a half percent. Ours is larger, but also minor, less than eight percent, and it has remained more or less the same in recent years. Therefore, the government has no strong motivation to protect the agrarians at any cost, since their destruction and consolidation, as we see, is almost inevitable. At least, within the framework of the current domestic and foreign policy course.