Expert: Officials Concede to the Collapse of the Farming Sector

Dorin Recean’s candid statements have revealed the current leadership’s lack of both political will and ability to halt the ongoing decline of small and medium-sized farms as land continues to concentrate in the hands of large agriholdings

Vladimir ROTARI, RTA: An ill-considered remark by Dorin Recean at a meeting of the Economic Council that he “does not care whether Moldova’s 1.7 million hectares of farmland are cultivated by 3,000 or 1,000 economic operators” sparked outrage among the farming community. The government is being accused of cynicism and of confirming its intention to drive small and medium-sized farms to bankruptcy in order to hand their land over “at a bargain price” to large agriholdings. To slightly ease the tensions, the relevant minister, Ludmila Catlabuga, promised Moldovan farmers “large-scale support measures”. These include implementing various agricultural modernization programs, building modern infrastructure, providing subsidies, and allocating additional funds to compensate those affected by natural disasters. An extra 100 million lei is being directed to this last purpose. However, it is doubtful that these measures will help the government win the favor of farmers, who almost constantly voice their discontent both in the media and during meetings, which most often end in heated exchanges and a lack of mutual understanding. From the pragmatic standpoint, the crisis facing the majority of small farms is hardly surprising. A year ago, I described the trends characteristic of our agriculture and where they were leading. As we can see, events are unfolding exactly along that trajectory and the government is well aware of it. For this reason, Recean’s rather provocative statements can be seen as the “fruit” of acknowledging this objective reality. It must be acknowledged: without bold measures, the future of Moldova’s agricultural sector will belong to large capital, most likely of foreign origin. It would be an emotional to claim that the authorities are deliberately bankrupting farmers. Yet it’s equally clear that saving them at any cost is not a priority. Thus, officials may simply be guided by strictly practical considerations. In economic terms, large agricultural holdings are undeniably far more efficient in using their land. They have access to cheaper capital, established logistics chains, and reliable sales markets; they adopt modern technologies more quickly and, thanks to economies of scale, achieve higher labor productivity and produce larger volumes at lower cost. This naturally makes their products far more competitive on the market. They also find it much easier to certify their production in accordance with strict international standards – a major advantage when exporting to the EU. From an administrative standpoint, it is certainly easier for the state to work with a limited number of large, “transparent” companies, from which taxes can be collected and financial flows monitored more efficiently, rather than with tens of thousands of small farms that often operate in the shadow economy or face problems with tax reporting. It is also significant that large companies are more often viewed as “reliable” investors: they attract foreign capital and secure major export contracts. For the government, this is a quick way to demonstrate investment growth and present a visible “success” in land market reform. But most importantly, this is essentially the only way to modernize the sector without direct budget injections. Our farmers often harbor somewhat unrealistic hopes regarding the European Union, urging the authorities to more actively request targeted EU assistance and viewing the European agricultural model, based on small farms, as exemplary. However, it must be understood that this model exists only thanks to massive subsidies, reaching hundreds of billions of euros. Moldova does not have such resources at its disposal, and Brussels is in no hurry to allocate funds in this area. For example, the initiative to create a development and solidarity fund for Moldovan agriculture, proposed by our officials, has, over the course of a year, failed to attract sufficient EU interest for practical implementation. To some extent, this can be explained by the fact that even within the EU, state support for farmers is declining. In particular, in its new budget, agricultural expenditures have fallen by 20-30% in real terms. In addition, EU countries are experiencing the same trend of gradually concentrating land in the hands of large companies. Perhaps this is why our partners do not see the situation in Moldova’s agricultural sector as particularly dramatic, since they themselves are facing similar tendencies. Thus, the government may genuinely believe that having a few highly efficient “flagship” agricultural enterprises is not only the only feasible option but also a beneficial one, as it would generate a greater macroeconomic effect than sustaining an inefficient small-scale sector, leading to increased tax revenues and higher export volumes. However, this shining coin has a downside. The experience of countries dominated by large agricultural holdings, despite achieving remarkable production results, demonstrates a range of accompanying negative consequences: widening social inequality, the emergence of a layer of bankrupt and landless farmers, many of whom could become a major social problem, soil depletion, and environmental issues. For Moldova, this would mean an increase in migration flows and the ultimate degradation of rural areas. Therefore, it is to be hoped that the authorities will be able to more accurately assess the consequences of their management decisions in administering the agricultural sector, carefully weighing all the pros and cons. Perhaps Moldova should try to create a balanced model consisting of a core of several large, highly efficient export-oriented holdings, a layer of medium-sized farms producing value-added products, and a broad sector of small farmers and household plots ensuring food security and rural employment. The latter will undoubtedly require government support, so officials should find more convincing arguments for international partners to secure targeted assistance. Unfortunately, I assess the chances of such an outcome as very slim. Even without considering conspiracy theories about “clearing” Moldovan land for acquisition by large multinational corporations, the objective processes within the sector do not inspire optimism.