Area Handbook for Romania Part 31

Through consolidation of 370 previously existing state agricultural enterprises, the farm reorganization of February 1971 created 145 larger enterprises subordinated to the Department of State Agriculture in the Ministry of Agriculture. In addition, seventy-four state agricultural enterprises for fattening hogs, raising poultry, and producing feeds and hothouse vegetables were subordinated to four specialized trusts. The consolidation increased the average size of the state enterprises from 16,000 acres to 34,600 acres of farmland. The enterprises comprised about 3,000 state farms on an area of over 5 million acres. Romanian sources reported that the reorganization was intended to bring management closer to production, to ensure improvement in all aspects of farm operation, to intensify concentration and specialization of production, and gradually to attain agro-industrial integration.

In official terminology, state agricultural enterprises will operate on the principle of economic self-administration. The enterprises will be responsible for their subordinate farms and will supervise operations according to the principle of internal economic administration. Briefly, this means that the agricultural enterprises and the farms must be financially self-sustaining, that directors of enterprises and farms are accorded a certain measure of discretion in planning and organizing production and in the use of resources, and that financial rewards beyond the normal pay accrue to each farm's managerial personnel and workers in accordance with the farm's own performance, regardless of the results obtained by other farms within the enterprise or by the parent enterprise itself.

Individual state farms, nevertheless, have no juridical status or bank accounts, nor may they enter into direct relation with other economic ent.i.ties outside the state agricultural enterprise of which they are a part. In large measure, they remain subject to the direction of the enterprise management. Information on the division of authority between the agricultural enterprises and the Department of State Agriculture in the ministry is not available. Complaints have been voiced in the Romanian press about unwarranted interference by higher authorities in the management of both the farms and the agricultural enterprises.

Workers on state farms and other state agricultural units are salaried employees of the state, ent.i.tled to paid annual vacations, social security and medical a.s.sistance, allocations for children, age or disability pensions, and various other benefits provided by law for employees of state enterprises. During slack periods, workers may be allowed up to 120 days of unpaid vacation per year, without losing seniority or other rights.

State farms are the best endowed agricultural units in the country.

Although they included only about 17 percent of the arable land in 1969, they possessed almost 28 percent of the tractors, 24 percent of the grain combines, and similar proportions of other major types of farm machinery. Moreover, they received more than 37 percent of the chemical fertilizers delivered to agriculture and farmed almost 33 percent of the irrigated land. As a consequence, per-acre yields on state farms have been generally higher than yields on collective farms.

Agricultural Mechanization Enterprises

The bulk of the mechanized operations on collective farms has been performed for payment in cash and in kind by specialized state enterprises for the mechanization of agriculture, which control a large share of the country's farm machinery and tractors. This policy has provided the state with an added lever of control over the farms; it was used in the past to extract a substantial volume of farm produce for the state through payments in kind for services rendered. For political reasons, and also because of the weak financial position of many collective farms, the government has not followed the example of other Eastern European states that disbanded their machine-tractor stations and sold the equipment to the farms.

In 1969 the agricultural mechanization enterprises controlled 70 percent of the available farm tractor power and an even larger share of the tractor-drawn and self-propelled farm machinery. State farms owned virtually all the balance. Collective farms, which cultivated 75 percent of the arable land, possessed only 1.6 percent of the tractor power and a still smaller proportion of major farm machinery items.

As of January 1, 1971, the system of agricultural mechanization enterprises was reorganized with a view to improving the quality of their operations. Forty enterprises were established throughout the country--one in each of the thirty-nine counties and one in the Bucharest area--with 772 subordinate stations to service an equal number of farm a.s.sociations and about 4,500 sections to work with individual collective farms. The main stated task of the mechanization sections is to introduce and expand the mechanization of plant and animal production on the farms.

To accomplish the task, each mechanization section is to coordinate the use of its own equipment with that belonging to the collective. Within the framework of this cooperation, the state mechanization enterprises were made increasingly responsible for the agricultural production process. The planning of mechanized farm operations, the allocation of equipment for specific purposes, and the timing and supervision of all operations are joint responsibilities of the section chief and the farm's chief engineer. Close cooperation and a smooth working relationship between them is therefore needed for effective performance.

Mechanized work on farms is carried on by permanent teams composed of agricultural mechanics and collective farm members. They take over a.s.signed areas in all sectors of the farm and are in charge of all relevant operations until the crops have been stored. In slack period the mechanization sections work outside the cooperative farms in order to utilize more fully their manpower and equipment.

The reorganization of the agricultural mechanization enterprises was accompanied by a change in the system of pay for mechanics and maintenance men to provide for greater incentives. For work done on the farms, these workers receive 80 percent of their annual salary, and the remainder is paid at the end of the year, in whole or in part, depending upon the degree to which the production plans of the farm on which they work are fulfilled. Provision was also made for bonus payments in the event of over-fulfillment of production plans. The shift in wage policy was accompanied by a raise in the rates of pay for mechanics, maintenance men, and personnel operating the equipment in the field on a piecework basis. This measure increases the burden on the already strained budgets of many collective farms.

FARM LABOR

The agricultural labor force presents a paradox of substantial underemployment a.s.sociated with widespread labor shortages, particularly of more productive, skilled personnel; the shortages are especially prevalent during the planting and harvesting seasons. This phenomenon is an outgrowth primarily of a progressive qualitative deterioration of the agricultural manpower pool, owing to a continuing transfer of predominantly young male workers into nonagricultural occupations.

Maldistribution of the labor force and poor management of the available manpower resources have been important contributing factors. The outmigration from agriculture has been spurred by a wide disparity in urban and rural incomes and by the relatively inferior living conditions on the farms. At the beginning of the 1970s the average income of farmworkers was only half as high as that of industrial workers.

Only fragmentary information relating to the farm labor force has been published in official statistics. Agricultural employment in 1969 const.i.tuted 51 percent of total employment, compared with 65.4 percent in 1960 and 74.1 percent in 1950. Published absolute figures bear only on employment by the state; in 1969 the state employed 431,200 persons, including 290,000 on state farms and 93,500 in agricultural mechanization enterprises. Data published in connection with a conference held by the Romanian Academy of Social and Political Sciences, however, implied that total agricultural employment in 1968 amounted to 5.2 million persons, including 4.3 million able-bodied collective farm members. The proportion of women in the collective farm labor force was reported to be 57.5 percent in 1966; the proportion was much larger in highly developed industrial zones. More than 70 percent of the collective farm workers, but only about 10 to 15 percent of the workers on state farms, were engaged in crop production.

Not all the collective farm members partic.i.p.ate in the work of the collective. Some are permanently employed in nonagricultural branches of the economy. Others--as many as 25 percent of all farmers in 1969--work as day laborers in industry and construction, on state farms, and in other occupations. Housewives with small children and wives of salaried farm employees also take no part in the collective work. Members who do partic.i.p.ate generally work only a portion of the year because there is not sufficient work for them to be fully occupied. In the years 1967 to 1969, these members, on the average, contributed only from 139 to 142 man-days per year. In 1968, for example, 22 percent of all collective farmers put in not more than forty man-days, and 55 percent of the farmers worked fewer than 120 days. Many farmers work only the minimum number of days required to keep their personal plots. There are wide variations in the degree of labor partic.i.p.ation between geographic regions, between individual farms, and among production sectors of a single farm. At the beginning of the decade of the 1970s about 40 percent of the income of collective farm families was derived from nonagricultural pursuits.

Underemployment in agriculture is expected to continue at least throughout the 1970s. Industry, though growing very rapidly, will not be able to absorb any significant numbers of farmworkers because of the government's emphasis on mechanization and automation of production. In the 1971-75 period industrial manpower requirements will be met almost entirely through natural population increase. Relieving agricultural underemployment through an expansion of the services sector is not being given serious consideration on the grounds that "no further expansion of this sector can be undertaken at the expense of achieving a high level of productivity in the branches of material production and hence in agriculture, too."

Raising the low productivity level of collective farm labor through greater capital inputs, and thereby increasing the incomes of members, presents a difficult problem not only because of a shortage of investment funds but also because the magnitude of the collective farm labor cannot be adjusted to the needs of production, as in the case of state farms; it is determined by the number of families living on the farm. The collective farm cannot limit the number of members who may partic.i.p.ate in the work. Each member has the right and, at the same time, the duty to partic.i.p.ate in the work performed for the collective, and the collective has the duty to provide equal opportunities for all its members to work and to earn adequate incomes; yet modernization of production necessarily brings with it an ever smaller need for manpower.

A solution of the farm manpower problem was not in sight by late 1971.

There was general agreement among Romanian economists concerned with the matter about a need to improve the utilization of the available labor resources, to increase farm incomes and, above all, to stop the migration of young people from villages to towns. No concrete program for attaining these ends, however, emerged from a national conference on farm labor held in mid-1970. Proposals advanced by a number of economists to expand industrial activities in the villages, particularly cottage industries and the processing of farm products, were questioned by others who feared that these activities would tend to drain some of the remaining productive elements from the collective farm labor force.

As expressed by one of the conferees, the search was on for a hybrid solution that would ensure full employment of the redundant labor force despite the process of farm modernization--a policy that inevitably leads to the maintenance of low earnings on many farms because the available work must be spread among an excessive number of members. In this context, foreign observers adopted a wait-and-see att.i.tude toward the changes in collective farm organization and in the method of payment to farmers introduced in January 1971 (see Organization, this ch.). They nevertheless expressed doubt about the ultimate efficacy of these measures because the income of farmers would still remain far below that of industrial workers.

INVESTMENT AND CREDIT

Investment

Investment in agriculture has been rising steadily, reaching an annual volume of almost 13 billion lei in 1970. The share of agriculture in total investment, however, declined from 19.5 percent in the 1961-65 period to 15.8 percent in the years 1966 through 1969. In relation to industrial investment during the same periods, investment in agriculture declined from 40 to 30 percent. Under the Five-Year Plan (1971-75), agriculture is to receive investments of at least 100 billion lei--an amount that is twice as large as the actual investment in the years 1966 through 1970 and that represents a somewhat larger share of total investment than was allocated to agriculture in that period.

No information is readily available on the proportion of the total investment used for the replacement of wornout a.s.sets and for the expansion of productive facilities. In the 1966-69 period replacement capital const.i.tuted about 30 percent of investments; in 1969 alone the proportion was as high as 46 percent.

The largest part--and a rising proportion--of the agricultural investment has been financed by the state; collective farms supplied the balance out of their own income. The share of state funds in the total agricultural investment increased steadily from about 66 percent in 1963 to 80 percent in 1969; this proportion is to be maintained during the Five-Year Plan (1971-75). Investment in collective farms has also been increasingly financed by the state through long-term credits; the share of government credits rose from 13 percent in 1965 to 35 percent in 1969. Investment out of the collectives' own funds remained stable during this period, at from 2.2 billion lei to 2.4 billion lei per year.

State farms have received a disproportionate amount of investment--38 percent in the 1965-69 period, as against 34 percent for collective farms. The investment share of collective farms during this period declined from about 38 to 30 percent of the total. On the basis of farmland acreage, investment in collective farms in 1969 amounted to only 18 percent of the funds invested in state farms. If the state investment in agricultural mechanization enterprises is included as investment for the benefit of the collective farms, the ratio of collective to state farm investment per acre was still only 25 percent.

Collective farm statutes require the farms to devote from 18 to 25 percent of their annual gross income to investment. Some Romanian economists consider net income to be a more equitable base; under such a system more of the farms' income would remain for distribution to members. In calculating gross income, amortization of fixed a.s.sets is generally not included as an expense, which further raises the base used for the computation of the compulsory investment fund. An official of the Agricultural Bank reported that, in the last few years of the 1960s, one-fourth of all collective farms set aside for investment up to 10 percent more than the maximum legal requirement.

Only partial information is available on the use of investment funds.

Roughly 40 percent of the investment in the 1962-69 period was devoted to construction and a.s.sembly work, and 33 percent was used to increase farm mechanization. It has not been made clear whether land improvement and irrigation are included in construction, but it seems likely that this is the case. Substantial funds were also invested in the expansion of orchards, vineyards, and livestock. Although significant advances were made in most of these areas, the level of farm mechanization and of irrigation remained low. In 1969 the equivalent of one fifteen-horsepower tractor was available for every 136 acres of arable land, and irrigated acreage const.i.tuted 6 percent of the arable area. The use of fertilizers lagged by comparison with other Eastern European countries.

Credit

Farm credit has been provided by the government through the Agricultural Bank, which was reconst.i.tuted as the Bank for Agriculture and the Food Industry in May 1971. Available information on the credit operations of the bank is limited to a few summary data on credits to collective farms. Information on the financing of state farms is lacking.

As expressed by the bank's president, long-term credits for investment and short-term credits for production needs have been used by the state as levers for the economic and organizational development and for the consolidation of collective farms. Long-term credits granted during the 1962-69 period amounted to 6.4 billion lei, or an average of 800 million lei per year. During the same period the farms received about 30 billion lei in short-term production credits, or about 3.75 billion lei per year. The annual volume of investment credits increased sharply after 1967; it was reported to have reached 1.8 billion lei in 1970 and to have been planned at more than 2 billion lei for 1971. A rise was also reported in the yearly volume of production credit.

Investment credits generally carry an annual 3-percent interest charge, but the interest rate may be reduced to 2 percent for economically weaker farms. Comparable information on production credit is not available, except for an official statement that a large part of it has been granted free of interest.

Postponement of scheduled long-term credit repayments may be authorized by the bank with the approval of the Ministry of Finance for periods of up to one year in the case of collective farms that are unable to meet the due date for reasons beyond their control, such as a crop failure.

At the same time the bank may discontinue credits or demand repayment before the due date in the event that borrowed funds are improperly or inefficiently used. Penalties are also provided for short-term borrowers who fail to respect contractual obligations. As a measure of a.s.sistance to poor cooperatives, the repayment of loans in the amount of 1.15 billion lei, contracted before 1968 and due in 1972, was remitted by decision of the Central Committee of the Romanian Communist Party in December 1971.

The distribution of long-term credits to collective farms among different types of investment projects changed significantly during the 1960s. In 1962 and 1963 more than half the credits were granted for the expansion of livestock production, and one-fourth of the credits were devoted to the construction of farm buildings. In the last two years of the decade, however, only 5 percent and 3 percent of the credits, respectively, were earmarked for these purposes. Emphasis shifted in the mid-1960s to land improvement, the extension of orchards and vineyards, and vegetable production. In the 1967-69 period 83 percent of the investment credits were used for these projects. A lack of significant progress in the livestock production of collective farms, despite the heavy investment, was the main reason for the drastic reduction in credits to this farm sector.

In mid-1971 the bank was authorized to grant credits to private farmers and to individual members of collective farms for periods of up to five years at an annual interest rate of 3 percent. These credits may be used to purchase for breeding and production purposes a limited number of cattle, sheep, bee colonies with hives, and fruit tree seedlings for orchards up to 7.4 acres in size. Credits may be granted up to 70 percent of the purchase value of these items. To ensure repayment of the loans, recipients must conclude contracts with state procurement agencies or collective farms for the sale of their products.

Procedures for granting credits to collective farms were tightened in 1969 in a move to ensure a more effective use of borrowed funds and the timely repayment of outstanding debts. Under the new regulations, credits may be granted only for investment projects and production expenditures that guarantee the attainment of planned returns and unconditionally ensure loan repayment on the due date. The princ.i.p.al criteria for granting long-term credits are the need for, and the economic effectiveness of, the investment projects and the outlook for completing the projects within prescribed time limits. Economic effectiveness is a.n.a.lyzed in terms of production growth, increase in output per acre or per head of livestock, and rise in labor productivity and revenues.

Despite increasingly close supervision by the bank of its borrowers'

activities, the effectiveness of investment credits in many instances has not measured up to expectations. Inadequate project a.n.a.lysis, construction delays, cost overruns, dissipation of funds, program changes that made partially or fully completed projects obsolete, and various other shortcomings have been cited by bank officials as the major reasons for this situation. As a means of resolving the problems, the officials have stressed the need for more profound project evaluation, greater stringency in granting loans, and increased firmness in the supervision of borrowers. They have also emphasized the criterion of ability to repay as being one of basic importance.

PRODUCTION

Total Farm Output

Official statistics on total farm output are limited to a percentage distribution of the output between crop and livestock production. In the 1965-69 period, for which comparable data are available, crop production accounted for 62 to 63 percent of output; and livestock production, for the remaining 37 to 38 percent. This ratio is reported to have prevailed throughout the 1950-70 period, even though the government has consistently sought to raise the contribution of the livestock sector to total output. An increase in the proportion of livestock products to 40.6 percent in 1970, reported by another source, was attributable mainly to the damage sustained by crops from the spring flood in that year.

Total gross agricultural output was unofficially reported to have reached 72.4 billion lei in 1969 and to have fallen to 68.7 billion lei in 1970 as a result of disastrous spring floods. The 1969 output volume, equal to that of 1967, represented the highest level attained through 1970. According to official index data, farm output in 1967 and in 1969 was 31 percent larger than it had been in 1960; the 1970 output was only 24 percent larger. These figures are equivalent to annual growth rates of 3.9 percent for the 1960-67 period and 2.2 percent for the years 1969 through 1970.

Net farm output increased much more slowly because the cost of material outlays per unit of output was steadily rising. In the 1963-68 period the increase in material costs amounted to 33 percent.

The growth of farm output during the 1960s was well below the planned levels of 70 to 80 percent for the years 1960 through 1965 and 26 to 32 percent for the 1966-70 period. Instead of more than doubling, output increased by barely one-fourth. Unfavorable weather conditions during some of the years were only partly responsible for the nonfulfillment of the agricultural output plans. Other major factors included the government's failure to provide the planned volume of inputs and an apathetic att.i.tude on the part of farmers owing to inadequate incentives.

The shortfall in fertilizer deliveries during the 1966-70 period alone amounted to 1.3 million tons of nutrients, or one-third of the planned tonnage. For the decade as a whole, the shortfall approached 2 million tons. Deliveries of tractors and farm machinery also lagged behind schedule. Although an area of almost 2 million acres was to be irrigated by 1965 and, under revised plans, an acreage of from 1.6 million to 1.7 million acres by 1970, only 550,000 acres had been actually irrigated by 1965 and 1.45 million acres by 1969. A careful and sympathetic Western student of Romanian economy concluded that the production targets for 1965 could not have been achieved even if all the planned inputs had been provided on schedule.

In the view of some Western observers, an att.i.tude of indifference on the part of farmers, based on the inadequacy of returns from farming, particularly on the collective farms, was an important contributing cause for the failure of agriculture to realize its growth potential.