Impact of agricultural investment on competitiveness (2021)
- Evaluation
- Jobs, Growth and Equality in Rural Areas
- Agricultural Production
- Evaluation
- Evaluation Methods
The evaluation analyses the impact of agricultural investments on competitiveness in Hungary’s 2014-2022 Rural Development Programme (RDP), using quantitative and qualitative methods to assess outcomes and inform future policy
- Hungary
- Programming period: 2014-2022
- Socio-economic impacts
The evaluation 'Impact of agricultural investments on competitiveness' commissioned by the Hungarian Ministry of Agriculture relates to the 2014-2022 RDP. The study aimed to assess the relevance, efficiency and effectiveness of the relevant measures of the Hungarian RDP, to inform future policy developments for the next CAP programming period. The study mainly relied on both quantitative and qualitative methods, based on secondary information. Specific limitations to the analysis were not noted regarding data availability. Several common monitoring and evaluation framework indicators (namely context, output, result, and impact) have been used and quantified. The main conclusions relate to the contribution of the RDP to increased agricultural production efficiency. Additionally, recommendations focus on increasing investment levels based on professional needs to enhance competitiveness, modernise horticulture and livestock farming, and develop irrigation infrastructure. Improving farm life and increasing competitiveness will contribute to a significant increase in the future of farmers whose primary economic activity is agriculture and their added value.
For the 2014-2020 CAP programming period, competitiveness has been at the heart of the EU's overall policy agenda (e.g. the Europe 2020 Strategy), which was present in RDPs from the start. Competitiveness, including productivity and profitability, is the most commonly used term in market economy analysis. Competitiveness usually depends on economic (prices, costs, income, market conditions, subsidies and deductions) and natural and operational conditions. Therefore, the evaluation examined the CAP objective of increasing competitiveness.
Specifically, the following indicators were used:
- agricultural entrepreneurial income (i.e. the indicator that gives the share of real net farm entrepreneurial income per unpaid annual labour unit);
- agricultural factor income (at gross value added factor cost per annual labour unit); and
- total agricultural factor productivity (total inputs of agricultural production relative to total output) to assess the impact of domestic agricultural investment on competitiveness.
The assessment methodology comprises seven methods, following the guidance of the CMEF and relevant recommendations. The evaluation consists of harmonising each method and synthesising its results.
- Processing of literature
- Secondary data analysis
- Rural Development Programme operational database analysis
- Analysis of operational databases of other operational programmes
- Impact analysis
- Economic impact monitoring
- Expert validation
Specific limitations to the analysis were not mentioned.
Investments have improved the competitiveness and profitability of agriculture, increased the efficiency of production and alleviated the problems caused by labour shortages. The volume of agricultural investments has been growing steadily since 2017 due to the favourable domestic and foreign macroeconomic environment, EU and domestic investment subsidies and lending conditions. In addition to increasing profitability, investments were encouraged by support from the RDP, direct payments under Pillar I of the CAP, favourable credit conditions, and measures to mitigate the negative economic effects of the COVID-19 epidemic. In addition to the state of the macroeconomic environment, the source and result of agricultural competitiveness was the increase in agricultural income.
Agricultural output increased by 28.2% and gross value added by 9.7%, with a continuous decline in the labour force between 2014 and 2019. In the frame of farms supported by the RDP, the average gross production value per work unit increased by 25% between 2014 and 2019. Gross production value increased by 18.2%, while average labour utilisation was lower in the supported farms (10.9 AWU), however it decreased to a lesser extent than in the control group.
Based on the control group impact assessment, the agricultural output per unit of labour of the supported farms increased. The supported farms have modernised their production and become more efficient. In addition to the shift to more intensive production, increasing output required retaining labour. Investments will increase output, enabling further employment of the workforce.
Based on the comparison between the RDP of the 2007-2014 programming period, and the RDP of 2014-2022, the lesson for the next CAP period was that effective implementation requires a stable institutional and legal background, simpler administration, high professional implementation quality and strengthening the financial feasibility in the scoring system.
Author(s)
Saád Tamás, Biró Szabolcs, Dudás Gyula, Sávoly János, Radóczné Kocsis Teréz, Tanka László, Vőneki Éva, Egri Edit, Molnár Zsuzsa